On Vnesheconombank’s Participation in Financing the Auto Assembly Plant Construction Project in the Far East

31 july 2009 года
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In the course of a meeting over the Far East development conducted by Russian Prime Minister Vladimir Putin in the city of Khabarovsk, State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’ and OJSC SOLLERS signed credit agreements on financing the Project to Set up an Auto Assembly Plant in the Primorsky region (the city of Vladivostok) and an Auto Components Plant in the Republic of Tatarstan (the city of Elabuga).

On behalf of Vnesheconombank the agreements were signed by Vnesheconombank Chairman Vladimir Dmitriev and on behalf of OJSC SOLLERS – by its General Director Vadim Shvetsov.

The Project is to be financed through opening two credit lines for OJSC SOLLERS’ subsidiary enterprises responsible for implementing the project: LLC “SOLLERS – the Far East” with a limit of 1.8 billion rubles and LLC “SOLLERS – SHTAMP” with a limit of 3.2 billion rubles. The total value of the project is 5.1 billion rubles and the project’s implementation period is 6 years.

An auto assembly plant is to be built in the Far East, with production facilities designed to manufacture no less than 10 thousands automobiles per year with a wide product line (Ssang Yong’s offroaders, and trucks by ISUZU, Fiat Ducato, and an auto components forging plant is to be built in the special economic zone Alabuga. The plant is designed to localize the production of the Fiat Ducato automobile. Vnesheconombank’s participation in financing this project was approved by the Bank’s Supervisory Board.

The commissioning of the plants will make it possible to create more than 1 thousand new jobs and reduce production costs of automobiles being assembled in Russia. Automobiles to be manufactured under the projects are scheduled to renew the regional vehicle fleet for social needs and be used for building infrastructural assets.

Under the Memorandum on the Bank’s Financial Policies the main line of Vnesheconombank’s investment activity is to implement investment projects aimed at developing innovations.

OJSC SOLLERS – is a Russian auto maker offering a full range of services on manufacturing, selling and servicing automobiles.

 

Origin: Press Office of Vnesheconombank
Contact person: Ekaterina Karasina
Phone: +7 (495) 608-46-93, Fax: +7 (499) 975-21-34
E-mail: press@veb.ru

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Vnesheconombank Chairman Vladimir Dmitriev’s Briefing on the Results of Vnesheconombank’s Supervisory Board Meeting

27 july 2009 года
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TV Channel Vesti-24
27.07.2009, 18:19

HOST: Vnesheconombank Chairman Vladimir Dmitriev’s Briefing is starting.

Vladimir DMITRIEV, Vnesheconombank Chairman: Vnesheconombank’s Supervisory Board meeting was held. It considered issues of the Bank’s core activity as a bank for development and foreign economic affairs. Nevertheless, a number of issues on the meeting’s agenda dealt with our role as an authorized agent for implementing crisis management measures. We also discussed an issue of extending subordinated loans. As far as the Bank’s investment activity is concerned, I am happy to say that a positive decision was made that Vnesheconombank would finance the construction of a large cement factory in the Penza region. The amount of financing is about 200 million dollars and it is comprised both of tied loans to be received from the China Eximbank and financial resources that Vnesheconombank will raise on foreign markets without using its own capital. This enterprise is one of the few that is to be built in the Russian Federation on the basis of modern, the so called “dry” technologies, that make it possible to manufacture products with a high degree of energy efficiency, maximum environment safety, minimal water consumption and a number of other advantages that distinguish this high-technology production from the production facilities operating nowadays, 80% of which are based on old, the so called wet cement production processes.

We also considered the Urengoy Power Station Construction Investment Project. Once commissioned, this electric power facility will be of crucial importance for a whole number of key economic sectors of Western Siberia. It will be highly instrumental for expanding geologic exploration, development of new gas and oil fields, petro and gas chemical facilities. A decision was made that this project would be implemented by Vnesheconombank’s entering the capital of INTER RAO Company, with the Bank’s participation share being up to a blocking stake and then it is INTER RAO that will finance OGK-1 for it to build the Urengoy Power Station. The idea is that in the foreseeable future, in about two-three years, Vnesheconombank’s participation share in INTER RAO’s charter capital would be put on sale to be either bought out by INTER RAO itself at a price sufficient to recover resources to be made available by Vnesheconombank and generate appropriate profit or to be sold to the third person, an outside investor interested in working with this project’s participants, I mean INTER RAO and OKG-1.

We also considered several other projects related to infrastructure and a number of industrial sectors whose end products are high value-added products.

We also considered extending a subordinated loan worth 75 billion rubles to Gazprombank, the loan is to be extended under a new scheme, that is, “one to three”. Vnesheconombank’s Supervisory Board agreed basic parameters of this loan which is in line with the procedure approved by the Supervisory Board with respect to the new scheme for extending subordinated loans under which the amount of loan portfolio is to be no less than the amount of subordinated loan to be extended by the state and an interest rate is to amount to a refinancing rate plus three percentage points and granted for not less than 1 year. Gazprombank is fulfilling all these terms and I think that in the most immediate future, once an appropriate loan agreement has been signed funds will be made available to one of the largest system-forming banks of Russia.

It was also noted that the total amount of applications being considered by Vnesheconombank inclusive of those approved by the Supervisory Board, here I mean those ten banks which were approved under the old scheme in the amount of 20 billion rubles as well as applications for a substantial amount of funds under the old scheme “one to one” and new applications might bring about a deficit of about 80 billion rubles taking into account that the total amount of financial resources made available to Vnesheconombank from the National Wealth Fund is 410 billion rubles due to a reduction by an amount of 40 billion that goes to the Mortgage Housing Lending Agency. We believe that in the stated amounts of budget for a period of three years allowance is made for taking this deficit into account too. But so far we can only expect banks that submitted applications would be in line with parameters defined by the Supervisory Board.

Today, we have also considered an issue of increasing the Russian Development Bank’s charter capital by 10 billion rubles having in mind that at one of the previous meetings of our Supervisory Board we made a decision in this respect on the wording “the possibility should be considered”. But after the Russian Federation made a contribution of 100 billion rubles to Vnesheconombank’s capital we found it necessary to consider increasing the Russian Development Bank’s charter capital as major programs of supporting small and medium-sized enterprises are implemented through this bank. Increased charter capital of the Russian Development Bank would make it possible to expand this program through the Bank’s own financing and also improve its balance-sheet indicators and enable it to apply to the Central Bank for providing significant refinancing amounts using loans to be extended by the Russian Development Bank to regional banks participating in the program of supporting small and medium-sized enterprises as collateral. With due regard to the fact that we have already opened a credit line of the German Bank KfW that committed 200 million euros to Russian regional banks against Vnesheconombank’s guarantee for providing support for small and medium-sized enterprises and with due regard to those programs that are being implemented in a purpose-oriented way through Vnesheconombank’s subsidiary banks, I mean Svyaz-Bank and GLOBEX-Bank, we are close to reaching a final agreement with the European Bank for Reconstruction and Development on fulfilling its intention to extend one billion euros against Vnesheconombank’s guarantee to support regional banks participating in programs of supporting small and medium-sized enterprises. The total amount of financial resources which could be spent by small and medium-sized enterprises within a year might be a lot greater than the announced sum of 30 billion rubles. We expect that no less than 100 billion rubles would be committed for supporting small and medium-sized enterprises. Now, we have already received applications, I mean the new scheme, from 150 banks and the amount of credits to be used by the Russian Development Bank as collateral to extend funds is already close to 40 billion rubles.  The subsequent pledge of these credits by the Russian Development Bank with regional banks would make it possible to obtain additional financing at the Central Bank which in its turn would be again used to lend regional banks against collateral in the form of credits extended to small and medium-sized enterprises.

Today we have also considered issues related Vnesheconombank’s subsidiary banks in Belarus and Ukraine, namely, Belvnesheconombank and Prominvestbank. These banks like Russian banks are facing understandable problems associated with the low quality of their loan portfolios, the general economic and financial situation in Belarus and Ukraine. Vnesheconombank proposed to enhance these banks’ capital base and at the same time exercise stringent control over the targeted use of funds and take strenuous efforts to make these banks play a crucial role in securing mutual goods turnover, implementing investment projects and promoting integration processes between Russia , Belarus and Ukraine. Exercising stringent control we have also to meet national regulatory standards.

Thus, today Vnesheconombank’s Supervisory Board has focused for the most part on the Bank’s core activity as a development institution and at the same time considered new projects in the context of crisis management measures.

 - Good evening, newspaper “Vremya Novostei”, Vladimir Alexandrovich, initially, 30 billion rubles were committed for lending to small enterprises. Experts said that this amount was not sufficient; you’ve said that you’ll be able to finance small enterprises in the amount of about 100 billion rubles. How much money does this market sector need now? To our best knowledge the next year’s forecast for lending to small and medium-sized enterprises is pessimistic. What can you say about the size of lending next year?

Vladimir DMITRIEV: Of course we are fully aware that even 100 billion rubles are insufficient not only for providing support for small and medium-size enterprises but for creating a middle class and ensuring stability in the regions. Moreover, small and medium-sized business development in the current situation is an exclusive crisis-management measure allowing us to create new jobs and address employment problems in those regions and at those production facilities which suffered serious downsizing. The more so as in our country the proportion of small and medium-sized enterprises in generating GDP as compared with leading industrialized  countries is negligibly small – it’s only about twenty percent while in Western European countries, in China this figure is more than 50% and in many countries it’s about 80%. But of course we should differentiate our program from the program of financing small and medium-sized enterprises implemented by commercial banks. Our activity main emphasis is placed on industrial and innovation production. Our loan portfolio was formed within the programs carried out earlier and you know that last year 9 billion rubles were earmarked to this end but actually as of today we’ve got 20 billion rubles taking into account our subsidiary banks. And the fact is that 60% of this loan portfolio accounts for industrial sectors, transport and less than 20% - for trade. By the way, four-five years ago the proportion was opposite, with more than 50% accounting for trade and a negligibly small proportion accounting for industry and the more so for innovation productions. We managed to redress this imbalance. And we are going to continue moving in this direction, keeping in mind the words by the Prime Minister that even 60% is not enough. It is this emphasis that is being laid by our foreign partners that provide support for regional banks operating with small and medium-sized enterprises. One of the conditions of a credit agreement that Bank KfW signs with regional banks against Vnesheconombank’s guarantee is that banks are to support innovation productions of small and medium-sized enterprises, energy-saving and other modern technologies. I believe that nationwide this amount is not enough but for the sectors that we have chosen as top priority ones this amount is of course is not maximal but at the same time is pretty significant for advancing innovations in small and medium-sized enterprises.

Good evening, Vladimir Alexandrovich. Rossiiskaya Gazeta, Pierre Sidibe. The Premier said about the need to create a modern auto production facility on the territory of the Far East that should become an alternative to auto import. Is it a matter of building a foreign auto assembly production facility? Are there any projects in place? What is a potential price of this sort of transaction?

Vladimir DMITRIEV: Today we have discussed an issue of expanding production facilities in the special economic zone in Elabuga in Tatarstan where several auto assembly production facilities of various auto makers are operating. As a whole, our goal is to create such an auto assembly production base not only in the central part of Russia but also in the Far East. This issue has been discussed repeatedly at various kinds of meetings. The implementation of this program is also important in terms of import substitution and in terms of job creation the more so in such high-technology industries. The goal is quite evident. People who were many times behind the Urals saw that both in Novosibirsk and in Krasnoyarsk to say nothing of Vladivostok there are a lot of cars with right-hand steering wheels. You get an impression that you found yourself somewhere in Malaysia but in different climatic conditions. So, the issue is very important and we should find ways and partners to address it.

- Interfax, Anna Laiva. Vladimir Alexandrovich, could you tell us please if the Government after all has agreed to make allowance for a possible deficit of funds you need to extend subordinated loans. How would the situation develop if this deficit increases? Recently you’ve mentioned a figure of 60 billion rubles and today - about 80 billion.

Vladimir DMITRIEV: First, I’d like to say it once more that this deficit is hypothetical, because as far as some banks are concerned we are now only considering their applications. And we have to see to what extent these banks meet criteria established by our Supervisory Board. But I can say quite confidently that the Government is fully aware that extension of subordinated loans is a way of supporting the banking system as a whole and therefore the real economy because this enables banks to meet regulatory standards, maintain required capital adequacy ratio and in part address a problem of bad credits. And of course, subordinated loans are intended for financing the real economy. That is why our government authorities approach this issue in a very serious way and are ready to address it without harming interests of financial institutions.

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