We Welcome Projects where Enthusiasts Try to Retain Competitive Edge

Finmarket
16.09   16:44

Vnesheconombank has been energetically carrying out crisis-management measures for already two years. This, to a certain extent, slowed down the implementation of investment projects as the Bank’s employees had to perform additional functions besides their main ones. Nevertheless, VEB continued to build up its loan portfolio as a Bank for Development. Vnesheconombank Deputy Chairman Anatoly Ballo told Interfax-AFI about new investment projects financed by VEB, the BEMO project, a project to build a furniture production facility and innovations.

- Vnesheconombank has been implementing crisis-management measures for already two years. What impact did it have on its activity as a Bank for Development?

- Since 2008, Vnesheconombank has been the Government’s instrument in implementing crisis-management measures. In the last months of 2008 and in early 2009, the Bank’s priorities were shifted towards supporting the financial system and this slowed down the implementation of investment projects because the Bank’s specialists involved in examining investment projects had at the same time to be engaged in restructuring credits as part of crisis-management measures. They had to perform additional functions besides their main ones. I’d like to remind you that the amount of financial support provided by Vnesheconombank as part of crisis-management measures was 964 billion rubles. These funds were used to refinance Russian companies’ foreign debts, extend subordinated loans and reorganize Globex Bank and Svyaz-Bank. Moreover, under certain decisions made by the Bank’s Supervisory Board we rendered assistance to such system-forming companies such as OJSC Amurmetall, Tractornye Zavody Corporation and OJSC Sevmash.

- Did all this have any impact on financing investment projects? How many investment projects have appeared in VEB’s loan portfolio this year?

- Yes, to some extent, because the same specialists were responsible for implementing crisis management measures and investment projects. All the lines of activity I mentioned above were not included in our original priorities.

Nevertheless, in 2009 we participated in implementing 78 investment projects and at the beginning of 2010, the Bank’s governance bodies made decisions on participating in funding another 20 new projects. The Bank’s participation amount in them is about 144 billion rubles. And we have already started to finance some of them. The amount of funds made already available is in excess of 41 billion rubles, but we have long periods of using resources, we do not provide the whole sum at once. On the one hand one can say that 20 new projects are not many but on the other one should not forget that it often takes no less than a year to prepare a project. The amount of our investment, credit and guarantee activity is about 360 billion rubles. We have already formed a loan portfolio with regard to more than 100 projects. And more than 200 projects are at various stages of expert examination.

- These are large figures. What’s the effect on the economy?

- Operating in this field, we are playing an important institutional role because in the long run we form Russian clientele, which is seeking to implement long-term projects, for example on the principles of project financing. It can be said that VEB is not only a pioneer of classical project financing when credit resources are made available without a burden on other assets or a parent company but also an instrument for implementing public private partnership projects (for example concession projects and BOT (BUILD-Operate-Transfer) projects).

As a whole, in our estimate, tax revenues from implementing investment projects in the budgets of various levels would amount to 222billion rubles for a period of their implementation and more than 60 thousand new jobs would be created.

- By the way, BEMO project will be implemented on the principles of budget financing. In late July, VEB’s Supervisory Board made a decision to finance it while RusGidro and RusAl had been waiting for this sort of decision since March. Why did it take so much time?

- The Boguchan Hydroelectric Power Station is a unique project. This sort of projects have always been funded by way of using budgetary funds. This is the first experience of project financing in Russia in hydropower engineering. It takes about a year in any bank to examine a project of such magnitude, the more so, a project structured on the principles of project financing. We have tested the project’s financing model several times. At present, almost all the issues have been settled.

- Providing funds for this project VEB is to receive engineering companies’ shares as collateral. Are there any other forms of collateral?

- This is a project financing and the Bank is to receive engineering companies’ shares but as far as the Boguchan Hydroelectric c Power Station is concerned we are also supposed to receive RusGidro’s limited surety (in the capacity of a company responsible for constructing and operating the hydroelectric power station). It is to come into effect only if there are changes in the schedule, construction budget or in case of improper operation of the hydroelectric power station’s operation. The only reason for it is that we have never had project financing in the hydroelectric power engineering. We don’t have any surety with regard to the aluminum plant.

- What’s the total cost of building the hydroelectric power station and the aluminum plant? What amount of funds is VEB supposed to provide?

- The total cost of building the hydroelectric power station is 72.5 billion rubles out of which Vnesheconombank is to provide about 28 billion rubles. The Bank is to provide 22 billion rubles for the construction of the aluminum plant, with the total cost of the project being 33 billion rubles.

In fact, under the investment program “A Comprehensive Development of the Lower Angara Region” the Bank finances three large-scale projects. One of them is Construction of the Boguchan Integrated Timber Processing Facility. We are planning to provide 40billion rubles to build the facility. All these projects are being implemented on the principles of public private partnership. The state provides 30 billion rubles from the Investment Fund to build infrastructure while private investors together with VEB’s funds provide about 150 billion rubles.

- At what stage is the project to build the Boguchan Integrated Timber Processing Facility?

- The Kraslesinvest Company acts as this project’s investor. It’s a very complicated project because new full-cycle pulp-and-paper plants haven’t been built in our country since the Soviet times. At present, we are seeking the help of the world’s leading pulp producer, Sweden’s Company Sodra, to develop a final concept of this timber processing facility. The deep timber processing project has already been launched. The “pulp component” is to be launched next year after completing a comprehensive mechanical timber processing stage. The Bank has started to finance the project and has already provided 2 billion rubles.

- When Vnesheconombank’s Supervisory Board made a decision to fund the BEMO project it also approved refinancing of RusAl credit worth 4.5 billion dollars obtained from Vnesheconombank by Sberbank. What’s the situation with unpaid credits obtained from VEB to refinance debts to foreign creditors?

- All companies except for RusAl have repaid their debts. Our representatives have withdrawn from all borrower-companies’ boards of directors but for RusAl‘s board of directors. The aluminum company is to repay its debt until October 29, and we do not expect any problems with the debt repayment.

- Not long ago, VEB signed an agreement on extending credits worth 1.4 billion dollars to Tobolsk-Polymer. Western banks and export agencies participated in the transaction. On what terms are these funds provided? How are the credits secured?

- It took us a year to make a positive decision on this project. The polypropylene complex with a capacity of 500 thousand tons per year will become the world’s largest plant of this kind. As to this project, VEB used only raised funds and didn’t use its own capital. All the funds were made available by foreign export agencies and banks. And it should be said that in our opinion credits are extended on very good terms. Interest rates are lower than mid-market rates on short-term borrowings.

It’s important that this project comprises a number of unique subprojects. For example, special vessels are being built and docking facilities are being expanded on the Tobol river to supply equipment of non-standard sizes. Moreover, the project’s implementation will require 4.5 thousand workers at the construction stage. 3.5 thousand new jobs will be created. Tax revenues during the project’s implementation are expected to amount to 45.5 billion rubles.

- VEB is also to provide funds to Mekran company for building a furniture production facility. What are the specific features of this project? What’s the credit period?

- The Bank has already started to finance the project. The total value of the project is 5.6 billion rubles, with our participation share being 4.3 billion rubles. The credit period is more than 10 years so the company is given a chance to repay the credit through its operating activity.

It’s important for us to boost domestic producers’ competitive edge. Do you see a lot Russian-made furniture in our shops? In order to get Russian people to buy less foreign-made furniture we should launch deep timber processing. In general, we welcome projects where Russian enthusiasts try to retain competitive edge.

- The Russian Government gives high priority to the development of the Northern Caucasus. What projects is VEB planning to finance this year in this region? Did the Bank receive any investment applications from project initiators?

- The Northern Caucasus is an absolute priority for us now; we are opening our representative office in the Northern Caucasus. We have more than 10 projects at various stages of implementation, the total amount of which is in excess of 60 billion rubles.

I’d like to specially stress the project to build the Arkhyz all-season mountain-climatic resort in Karachaevo-Cherkessia, which was initiated by Sinara Company. The project’s general concept provides for the construction of four village-complexes to accommodate more than 25 thousand people and a network of 69 ski lifts and cableways. We engaged French Bank CDC for this project.

- VEB has repeatedly said that it would increase a share of innovation projects in its loan portfolio. How many innovation projects is VEB funding today? What sort of projects are they?

- Most of our projects are of innovative nature - be it a cement plant construction project or a turkey-growing industrial complex project.

To tell you the truth, it’s pretty difficult to implement high-technology projects. One of such projects was the one aimed at building a submicron semiconductor production faculty. We also planned to participate in the project aimed at manufacturing Glonass/GPS navigation receivers. M2M Telematica was responsible for implementing the project. We were ready to start financing the project, when corporate changes took place in the company. The project’s structure has changed now –it incorporated AFK Sistema. Thus, we are examining a large-scale, updated ERA Glonass project being implemented by the Navigation Innovation Systems Company. The project provides for creating Glonass/GPS navigation receivers and user terminals as well as creating an emergency urgent response system on their basis. A requested amount of financing is 3.1 billion rubles

In the near future, we are supposed to submit a project to create supercomputers to consideration by the Bank’s Supervisory Board. I wouldn’t disclose the name of the company responsible for implementing this project but I can say that it is a leading player on the Russian market.