It is topical to assign ratings to projects and identify their priority

- In the conditions of the financial crisis Vnesheconombank’s active involvement in implementing measures for supporting Russia’s financial system can’t help influencing the Bank’s activity as a development institution. How would you assess VEB’s performance?

- I find it difficult to assess our Bank’s performance. Even before Vnesheconombank was transformed into the Bank for Development, it placed much emphasis on supporting investment projects aimed at developing the most important sectors of the Russian economy. I hope we succeeded in establishing ourselves as a development institution, that is, an efficient instrument for supporting projects of high priority for the Russian economy.

- Vnesheconombank’s loan portfolio under the Federal Law “On the Bank for Development” amounted to about 255 billion rubles, with more than 80% of credits being mid and long-term ones (for the most part they are long-term credits with a tenor of more than three years). But for the crisis, we would not only have achieved our loan portfolio planned target of 270 billion rubles but we would also have far surpassed this figure.

Since the establishment of the Bank for Development a year and a half ago more than 70 investment projects worth about 750 billon rubles with the Bank’s participation share in excess of 400 billion rubles have undergone expert’s examination and have been approved by Vnesheconombank for financing. Investment projects account for a better part of these projects. They are designed to enhance the development of innovations and infrastructure (more than 80%). They include OJSC Terminal’s project to construct the Sheremetjevo 3 air-terminal complex, OJSC RZHD’s project to develop the infrastructure of the Kuzbass-Far Eastern Transport Hub, OJSC the Kaluga Region Development Corporation’s project aimed at building infrastructure of industrial parks: forming a cluster to manufacture automobiles and auto components. Vnesheconombank also participates in carrying out investment programs of OJSC Inter RAO EES and OJSC United Aircraft Building Company.

With our Bank’s support, OJSC Angstrem-T is building the first Russian production facility to manufacture sub-micron semiconductor components and OJSC Helicopters of Russia has launched serial production of the Ka-226T helicopter.

- How are you searching for new projects?

Our Bank is not a customer-oriented but a project- oriented bank and we are not searching for customers on the market. Business experience shows that companies interested in implementing projects tend to turn for help to regional authorities and to core ministries. We are working with regions especially with those where regional development institutions are in place and these institutions are responsible for generating projects and submitting the most interesting and well-prepared ones to us for consideration. If a regional administration is interested in implementing a project and invests funds in its preparation, then everything is going fast and well. The best example is the Kaluga region.

- What are the most interesting newly approved projects, which are not well-known so far?

In my opinion, the project to construct the Roza Khutor complex is very demonstrative. Under this project a sports and tourist complex is to be built in the Krasnaya Polyana district. This complex is going to be one of the most important facilities at the 2014 Winter Olympics. This Alpine ski resort is to be built and operated on public private partnership principles under the program of building Olympic facilities and developing Sochi as a mountain and climate resort. The total value of the project is about 38.5 billion rubles. Vnesheconombank intends to make credit resources available within the established limit of 21 billion rubles for a period of 15 years and the remaining amount of investments is to be financed by a private investor.

Another interesting project is to build a gasochemical production facility in Tatarstan. In mid October Tatarstan’s President Mintimer Shaimiev and Vnesheconombank’s Chairman Vladimir Dmitriev encased a capsule in the foundation stone of a unique for Russia mineral fertilizer integrated production complex worth 1.5 billion US dollars in the city of Mendeleevsk. The production facility is planned to be built for 36 months and launched into production in the first quarter of the year 2012. The project’s payback period is 6-7 years. The gasochemical complex will be the first modern production facility in the past 25 years to manufacture ammonia in Russia and the CIS. A distinguishing feature of the factory is that there will be no carbon dioxide emissions and that carbon dioxide will be entirely utilized to manufacture carbamite and methanol. Japan’s company Mitsubishi Heavy Industries has been selected as a contractor and another Japan’s company Sojitz Corporation has been selected as the project’s coordinator. Tatarstan’s government represented by the Investment – Venture Fund and Vnesheconombank act as the project’s investors. Under the project, debt financing is to amount to 870 million US dollars, which will be entirely refinanced in the conditions of the crisis by a syndicate of Japanese banks.

- Would you tell us about Vnesheconombank’s new anti-crisis functions? To what extent did the Bank prove to be prepared to carry out anti-crisis measures?

Even a few months ago, we were not aware that any different functions other than financing of major investment projects would be assigned to us. But the government provided us with an active, to be more precise, key role in stabilizing economic and financial situation in the country, and we started to act without any delay. Our considerable experience and our employees’ professional expertise helped us to launch the process almost immediately.

I would like to remind you that the Law “On Additional Measures for Supporting the Financial System of the Russian Federation” was passed on October 13, 2008 and on the same day the procedure for implementing the measures provided by the law was published and the first monetary funds were made available as early as October 30!

And we managed to do it despite the fact that the procedure for processing applications for refinancing borrowers’ debt obligations to foreign financial institutions provides for five decision-making levels and also for numerous mandatory criteria and requirements for documents. The Bank proved to be prepared to act quickly and decisively to overcome the crisis situation in the Russian economy. To my mind, the important thing was that we were not developing the techniques of considering and examining applications from the scratch, we already had a well-proven procedure for conducting expert’s examination of investment projects. We understood general techniques and adapted the bank’s staff for addressing new challenges. Otherwise we wouldn’t have been able to develop and implement the whole system of anti-crisis measures so rapidly.

- The current crisis makes the largest Russian companies to review their investment plans. Is Vnesheconombank going to change anything in its activity in terms of priorities and selection of projects?

Yes, it is. The situation forces us into making certain corrections. Responding to the realities, we might suspend consideration of certain projects as agreed upon with core ministries and departments. In doing so, we’ll carry on performing our main functions to assist in enhancing the development of the Russian economy. All the projects that are already being financed and have passed the point of no return are bound to be implemented. But a number of projects will be suspended. Nevertheless, the number of proposals coming from companies is on the rise. And as a result, it is becoming increasingly topical to assign ratings to and identify the priority of projects. Vnesheconombank initiated to expand the list of sectoral investment projects. Agroindustrial complex has been already included in this list. Proposals to introduce changes and additions to the Memorandum on Vnesheconombank’s Financial Policies are under preparation. Their adoption would make it possible for us to engage in financing projects in the pharmaceutical and construction materials industries. We are well aware that the Bank cannot and must not operate in all economic sectors and we offer to include strategic industries in the list of our priorities. In particular, we are planning to focus on the cement industry. The Government is making strenuous efforts to involve Vnesheconombank in working out the state’s support measures including those aimed at making it possible to finance the largest investment projects in the cement industry. These are projects aimed at constructing cement factories in the Kaluga, Leningrad, Penza and Tambov regions. We have a lack of production facilities and growing prices in the construction materials industry. Many infrastructural projects can’t be implemented if there isn’t a cement or brick factory nearby. So we are facing a paradoxical situation when we are allowed to finance infrastructure but are not allowed to finance the construction of a factory needed to build this infrastructure.

In a word, we’ve got a lot of proposals for new lines of activity and we are ready to act. But financing remains to be an open-ended question. The crisis reduced Vnesheconombank’s capital significantly and there is no reason to explain why. Naturally, we had to review our loan portfolio as a part of funds were used to implement anti-crisis measures and despite the fact that at the end of October we obtained a syndicated loan of 335 billion euros from a pool of the largest world banks at a rather attractive rate, we have to forecast difficulties in raising funds on world markets in the future. To my best knowledge, this was the last syndicated loan extended to Russia’s borrower on the foreign market.

It’s quite evident that in the current situation there is a need for increasing the Bank’s capital significantly if the Bank is to continue its activity on supporting economically important and socially meaningful projects in full. At the moment, there remains a need for financing not only the projects approved by Vnesheconombank’s collegial governance bodies, which are going through a stage of executing credit documentation and are worth 300 billion rubles but also projects undergoing a complex expert examination. And here we mean 60 projects, with the Bank’s expected participation share in them being 600 billion rubles.

I would like to stress it once more that we are talking about the possibility of implementing large-scale infrastructural and innovation projects. Given this possibility, we would be able to keep private business interested in financing projects and also create preconditions for stimulating economic growth. By analyzing our foreign colleagues’ business experience, we can see that they are keen to speed up their efforts to finance infrastructure and other crucial development projects. I think that Vnesheconombank’s first-year experience as the Bank for Development testifies to the fact that we are ready and competent enough to address the most challenging problems we are facing.