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