VEB.RF Reports Net Profit of RUB 14.7 bn for 9M 2021

26 november 2021 года
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VEB.RF published its interim condensed consolidated financial statements under IFRS as at September 30, 2021.  

“VEB.RF generated a net profit of RUB 14.7 bn in accordance with IFRS for the nine months of 2021 and provided unprecedented support for nationally significant projects and projects aimed at improving the quality of life, with the loans given by VEB.RF growing by RUB 554.8 bn. The major drivers of the financial result delivered in the three quarters of 2021 were the net interest income and the net fee and commission income. VEB.RF’s liquidity cushion and capital adequacy ratio of 15.9 percent allow VEB.RF to scale up financing for infrastructure, industry, exports, and regional and municipal development with support from the Russian Government. VEB.RF’s absolute priority is to invest in new facilities and support businesses during the pandemics by issuing guarantees to banks for zero- or low-interest loans to entrepreneurs designed to help them retain employees,” VEB.RF Chief Financial Officer Andrey Moskovskikh said.

VEB.RF Group’s key financials for 9M 2021 are as follows:

In 9M 2021, the VEB.RF Group made a profit of RUB 14.7 bn against a loss of RUB 29.7 bn as compared to the same period last year.

The positive financial result was driven by:

  • net operating income (net of allowance) of RUB 101.8 bn, which is by RUB 11.9 bn less than for the same period of 2020;

  • decrease in non-interest expense to RUB 76.8 bn from RUB 111.4 bn for 9M 2020.

The operating income dynamics was stipulated by the following factors.

  • Net interest income in the reporting period went up to RUB 16.1 bn as compared to RUB 6.3 bn for 9M 2020. Increase in interest income by RUB 3.0 bn was mainly due to the interest income growth from the loan portfolio, and interest expense decreased by RUB 6.8 bn, as the effect of the reduced cost of funding.
  • Net fee and commission income went up by RUB 12.2 bn from RUB 11.1 bn for 9M 2020 to RUB 23.3 bn for 9M 2021 due to the commission income on guarantees issued as part of the state anti-crisis programme (amortization of loss on initial recognition of guarantees).
  • Non-interest income for 9M 2021 amounted to RUB 26.1 bn compared to RUB 76.7 bn for the same period last year. In the reporting period that ended September 30, 2021 the loss was recorded on initial recognition of guarantees issued on preferential terms as part of the new state COVID-19 rescue scheme.

The Group’s assets went up by 14.5% (+ RUB 492.7 bn) against the beginning of 2021 and as at September 30, 2021 reached RUB 3 898.8 bn. The assets increase was mainly driven by a substantial growth in the loan portfolio. 

Against the beginning of 2021 the total loan and leasing portfolio (net of provision for impairment) went up by 34.2% (+ RUB 460.4bn) to reach RUB 1 805.3 bn. In total, the loan and leasing portfolios account for 46.3% of the Group’s total assets.

The amount of loans granted by VEB.RF in 9M 2021 reached record RUB 554.8 bn, with the amount of loans granted in Q3 almost doubling the result of the first six months. Investment priority sectors include industry, infrastructure including urban economy projects, as well as export support. Since the beginning of 2021, financing has started for twenty eight new projects in priority economic sectors.

In the reporting period allowance for expected credit loss was charged in the amount of RUB 8.0 bn.

The Group’s liabilities increased by 16.3% (+ RUB 442.3 bn) since the beginning of 2021 and as at September 30, 2021 reached RUB 3 159.4 bn. Inter alia, amounts due to banks went up by 39.0% (+ RUB 231.7 bn) and debt securities issued increased by 13.3% (+ RUB 101.7 bn). Amounts due to the Russian Government and the Bank of Russia went down by 3.1% (- RUB 19.4 bn). 

VEB.RF has consistently built up its market funding to ensure increased financing of major projects of the national economy. 

The Group’s equity in 9M 2021 went up by RUB 50.4 bn (+7.3%) to reach RUB 739.4 bn as at September 30, 2021. This equity growth was stipulated by the profit for 9M 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 to increase a subsidiary’s authorized capital. 

VEB.RF’s capital adequacy ratio was 15.9% as at September 30, 2021 (17.0% as at December 31, 2020).

In August 2021, the Bank of Russia Board of Directors approved amendments to Instruction No. 199-I which stipulate weighing all bank credit claims on State development Corporation VEB.RF nominated and funded in rubles with the risk weight of 20% when calculating the prudential ratios of banks (previously, from 20% to 100%, depending on credit claims parameters). These amendments came into effect in October 2021.

The decision of the Bank of Russia will contribute to the expansion of interbank cooperation, including due to the growth in demand of Russian banks for VEB.RF public debt instruments.

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VEB.RF and Gazprombank Support KuibyshevAzot’s New Production Facility

15 november 2021 года
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Work on building a nitric acid and ammonium nitrate solution production facility will be financed under the Project Financing Factory

The facility will be built using state-of-the-art energy efficiency and HSE technologies

The KuibyshevAzot production site in Tolyatti will implement a second project under the Project Financing Factory. With financial support from VEB.RF and Gazprombank, KuibyshevAzot will build a nitric acid and ammonium nitrate solution production facility (capacity: 1,575 and 2,000 tonnes per day respectively). The total project budget is RUB18.3bn (including CAPEX, VAT, investment OPEX, and contingency funds).

VEB.RF offered a comprehensive financing solution for the project, involving the acquisition of 49% of shares in the authorised capital of the borrower by VEB.RF, a syndicated loan, and letters of credit.

The RUB15.2bn syndicated loan agreement was signed by VEB.RF, Gazprombank, KuibyshevAzot (the project initiator), and Nitrocom (the borrower). VEB.RF takes on the roles of the arranger and the syndicate agent, Gazprombank acts as the collateral manager, and Bank GPB International S.A. (Gazprombank’s subsidiary) acts the foreign security agent. The project initiator will commit at least 20% to the project’s budget.

In addition, VEB.RF intends to issue uncovered letters of credit totalling EUR72.8mn for payments under the engineering and procurement agreement.

VEB.RF’s Deputy Chairman and Member of the Management Yuriy Korsun:

“Project initiators see the benefits of the Factory, and KuibyshevAzot has decided to embark upon the second project under the Factory. The project will contribute to Tolyatti’s social and economic development, first of all, by creating highly qualified jobs. The Factory has proved itself and is implementing 16 projects totalling about one trillion roubles. Four projects were put into operation, including KuibyshevAzot's sulphuric acid and refined oleum production facility (last December). Today, we have more than 30 projects with the largest Russian banks in the pipeline.”

The facility was approved by KuibyshevAzot's Board of Directors as a part of the strategic programme to boost high value-added nitrogen fertilisers production. The project is primarily designed to ensure continued supply of nitric acid and ammonium nitrate solution for KuibyshevAzot's needs which will boost domestic production and consumption of two of the most popular mineral fertilizers (ammonium nitrate and UAN solutions). The project selected the Casale Group as the general contractor.

KuibyshevAzot’s Director General Alexander Gerasimenko:

“KuibyshevAzot continues to implement investment projects to boost production and to reduce the negative impact on the environment. We are active in cooperating with Russian and foreign partners and we focus on introducing advanced technologies ensuring a high level of industrial and environmental safety. We have a good track record of efficient Project Financing Factory cooperation with professionals from VEB.RF and Gazprombank which gives us hope for successful implementation of the project with Casale. All the parties to this transaction are our reliable partners with whom we forged a constructive dialogue. Our partners bring new investment and production opportunities. KuibyshevAzot is gradually implementing its strategy to ensure efficient growth and development. We press on with expanding our product line-up of efficient compound fertilizers based on the latest international market trends and the needs of the Russian agribusiness. We find it especially important that the process solutions proposed by Casale meet the latest HSE requirements. The new production facility construction project will make it possible to upgrade our equipment in the future and to reduce adverse environmental impacts.”

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

 “To provide financing for investment projects in the chemical industry is one of the main areas of Gazprombank’s project financing, we have one of the best teams of experts in this area. We are pleased to promote our successful and reliable cooperation with our client, KuibyshevAzot. We generated synergy by bringing together highly skilled professional teams of the client and the lenders to scale up efficient financing arrangements. This is a high-value added project which is fully compliant with our investment strategy. This facility will increase tax revenues for budgets at all level thus improving quality of life in Russia.”

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VEB.RF Supports RUB710bn Worth of Projects over Nine Months

21 october 2021 года
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  • The loans and guarantees given by VEB.RF in three quarters of 2021 have totalled about 535 billion roubles and 176.3 billion roubles respectively;
  • VEB.RF’s primary investment focus was on industry, infrastructure, exports and SMEs.

VEB.RF lent about 535 billion roubles in the first nine months of 2021, which is 2.5 times more than in 2020 (215.1 billion roubles).

The total amount of financing provided by VEB.RF in nine months of 2021 for industrial and infrastructure projects including urban economy was 475.3 billion roubles and more than 24 billion roubles respectively. More than 26 billion roubles was allocated to finance Russia’s high-technology exports. Specifically, VEB.RF launched the financing of a whole range of transactions for the supply of Russian-made equipment to Uzbekistan and Kazakhstan.

Under the new low-interest lending programme to provide businesses with 3% loans aimed at helping companies to retain their employees and recover businesses, VEB.RF issued surety bonds totalling 104.6 billion roubles to commercial banks.

Nikolay Tsekhomsky, First Deputy Chairman and Member of the Management Board, VEB.RF:

“Since the beginning of 2021, VEB.RF has financed 28 new projects including the largest industrial facilities, such as the Kingisepp-based ammonia and carbamide production facility, the steel mill construction in Vyksa, liquefied natural gas production by Arctic LNG 2, the development project for the Korbalikhinskoye polymetal deposit in the Altai Territory, and infrastructure projects including the construction of airport terminals in Novy Urengoy and Novosibirsk, and the Ufa East Exit. VEB.RF is supporting renovation of the tram network in Taganrog, with first new trams already in operation. The construction of a tram depo has started for the Verkhniaya Pyshma-Yekaterinburg route.”

VEB.RF is focused on the socio-economic impact of financed projects. A very significant project is an ethane-containing gas processing plant in Ust-Luga. The project will be the largest gas-processing production facility in Russia bringing significant impetus to the development of the Leningrad Region and the neighbouring municipalities. With the participation of VEB.RF, a new comfortable housing estate will be built for the plant employees in close vicinity to the plant. The first tranche has already been allocated for the pre-investment phase of the project.”

According to the new strategy, VEB.RF Group’s five key focus areas include:

  • Major industrial projects. Above all, this concerns export-oriented projects improving the competitiveness and expanding the use of breakthrough technology;
  • Infrastructure and urban economy;
  • Exports;
  • Small and medium-sized businesses;
  • Information technology and innovation.
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VEB.RF Chief Legal Officer Igor Krasnov: Modern Russian Arbitration Centres Are Best Dispute Resolution Platforms

20 october 2021 года
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The conference focused on the five year reform of the Russian arbitration institute and moderated by Head of the Russian Union of Industrialists and Entrepreneurs Aleksander Shokhin was held as part of the Russian Business Week. The participants discussed the current state of Russian arbitration system and future measures aimed at its development and improvement of the respective legislation and enforcement practices.

VEB.RF’s Chief Legal Officer Igor Krasnov noted increased legal risks related to dispute resolution involving major Russian businesses in foreign jurisdictions and increased protectionism demonstrated by legal systems of certain states.  

An arbitration court represents a single judiciary, and a claimant having an arbitration award may submit it to a competent jurisdiction for approval and obtaining a writ of execution. In addition, an arbitration proceeding provides for the selection of an arbitrator in accordance with set procedures. Therefore, dispute resolution by arbitration is much more effective, expeditious and confidential.  

Igor Krasnov offered to use Russian arbitration centres as modern and independent forums to resolve complicated legal and economic disputes.

“We believe that disputes between Russian counterparties should be settled by negotiations and, where necessary, through mediation. If a dispute cannot be resolved amicably, then a modern Russian arbitration centre could become the best platform for dispute settlement and finding a compromise with partners and clients,” Igor Krasnov said.

He also noted that VEB.RF had set a legal framework governing interaction between development institutions and Russian arbitration courts, and determined the priority of arbitration in VEB.RF’s standard loan and collateral documentation.

“VEB.RF’s clients are advised to use arbitral clauses allowing them to have obvious advantages of arbitration proceeding: expeditiousness, thoroughness, democratic nature, progressiveness and high arbitration standards.

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VEB.RF’s Decarbonisation Agenda Presented to FiCS

20 october 2021 года
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The second edition of the Finance in Common Summit (FiCS) ended in Rome today. VEB.RF Senior Banker Sergei Storchak told the summit about VEB.RF’s products and priorities contributing towards the UN Sustainable Development Goals, particularly those related to promoting the green finance market and facilitating energy transition in Russia.

VEB.RF is implementing its own transformation strategy to give a sharp focus to protecting the environment, improving the well-being of people and communities, and introducing best practices in governance,” Sergei Storchak said. “According to the IDFC methodology, green projects already make up more than a third of our portfolio, and we intend to increase their proportion. We are active in financing electric transport and clean energy sources, and helping Russian manufacturers to switch to low-carbon technology.”

According to Sergei Storchak, VEB.RF has a government mandate to develop Russia’s national taxonomy for green projects. Last month, the corresponding document was approved by the Russian Prime Minister. “Russia became one of the few countries with their own national taxonomies,” he said. “We have already started promoting our taxonomy domestically and will present it to the international community at the COP26 conference in November. It is 95% compliant with the new EU taxonomy, and we hope it will meet with a positive reception from the business and expert communities.”

In his speech, Sergei Storchak also told the summit of public development banks about inequalities in access to financing for decarbonisation and energy transition in different countries. VEB.RF is currently subject to restrictions on long-term borrowing from the international market. “Climate issues and related processes have no respect for political boundaries,” he said. “Limiting the ability of VEB.RF and other Russian institutions to raise capital for decarbonisation means putting obstacles in the way of the Paris Agreement. We believe that all restrictions of this kind should be lifted, at least in the case of financial instruments and projects recognised as green in accordance with internationally recognised taxonomies and verification systems. We are open to working together with the coalition members on these issues.”

The Finance in Common Summit (FiCS) is a large international event organised by a coalition of 530 development institutions from all over the world. The goal of the FiCS coalition is to reinforce the global financial architecture towards sustainable development, with public development banks playing a central role. The coalition brings together not only development institutions but also key stakeholders such as governments, regulators, the United Nations, private investors, civil society, academia and central banks. The inaugural Summit was held in Paris in November 2020.

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