A unique window of opportunity formed for Russian exporters

Origin: Oleg Panteleev // AviaPort.Ru
Published: 25.08.2015, 08:58

Vnesheconombank is a key player responsible for export funding of both Russian aircraft and spare parts. But the Bank is not going to limit itself to 120 billion rubles committed to this end. Director of the Export Financing Department Daniil Algulyan believes that operational leasing will open up great prospects for and Vnesheconombank is ready to develop cooperation with leasing companies that will offer such a service.

- The Russian economy is going through a difficult period. Is there a possibility now to fund high technology exports?

- Despite the problems, our country’s economy is facing now, we can say that a unique window of opportunity has been formed for Russian exporters to enter new markets and expand their presence on international markets. A fall in the ruble exchange rate is becoming an additional factor of competitiveness. Here I mean above all non-raw materials exports - supplies of manufacturing and high technology sectors products.

When we talk about exports now, we mean competition not only between products themselves but also exporters’ financial proposals. Our task is to prevent Russian exporters from being in an unequal position with regard to their key competitors on international markets. To guarantee this, we need to provide an efficient support for our international supplies. We need a comprehensive support system, which includes a set of financial and non-financial instruments allowing Russian exporters to promote their products to international markets.

- They have been talking for a long time about the need to create a high-technology products export support system. What do we have at our disposal nowadays?

- At present, a whole system of institutions within Vnesheconombank Group has been set up. This system is responsible for providing financial support to promote Russian products abroad. Vnesheconombank is a central part of this system – it extends both credits and guarantees. Moreover, Vnesheconombank focuses above all on large-scale and structurally complicated transactions whereas Roseximbank – a member of Vnesheconombank Group – is responsible for “straight-line” funding of export credits. It also provides services on export and pre-export funding as well as extending required guarantees. The Export Insurance Agency of Russia (EXIAR) is responsible for export insurance.

- A key non-financial support institution is a recently created Russian Export Center which also performs coordination functions and acts as “single” window”.

- Vnesheconombank’s other subsidiaries also assist the Bank for Development in performing its functions to support exports, for example, Russia’s largest leasing company VEB-Leasing. We also actively use our subsidiaries abroad. For example, our subsidiary bank – BelVEB is one of the largest banks in Belarus. So, we can say that a comprehensive export support system has been put in place and is dynamically developing.

- Is there a need for these instruments in the aviation industry?

- As to non-raw materials exports, we work along a whole range of lines. Aviation industry is one of our top priorities. At present, Vnesheconombank’s portfolio of funding Russian aviation and space exports exceeded 120 billion rubles. Of course, our landmark project is Sukhoi Superjet 100. I think it would be right to say that Vnesheconombank is a key partner bank in this aircraft’s exports. In the past years, we have participated in funding the most part of these aircraft. A landmark transaction was to supply the aircraft to Mexico where we act as a lead organizer of a consortium of funding banks.

- How do you size up this transaction? Didn’t the first step prove to be a failure?

- The fact that after an original arrangement for supplying 20 aircraft an arrangement has been made now for supplying 10 more aircraft shows that the transaction was successful. On the other hand, the funding scheme won a wide international recognition and a number of prestigious awards from trade magazines for example from Global Transport Finance.

- A consortium of banks participated in funding the aircraft for Interjet including Western banks and insurance agencies. Are there any risks that it will be impossible to put together a syndicate of banks and partners with regard to other export transactions?

- I would break this question into two parts. Can we use the experience we gained from foreign partner banks with regard to Mexico? Yes, we can. We don’t see any problems in setting up this sort of consortiums to fund other transactions related to supplying Superjet aircraft. A c change in the environment hasn’t influenced the situation very much.

But I would also like to say that putting together this sort of consortiums is a pretty individual matter intended for a specific buyer. So, when we talk about supplying aircraft for each individual company we should keep in mind that a composition of funding banks and institutions might vary pretty substantially. This is associated both with perception of specific counterparties’ risks and with limits which various banks and export credit agencies have with regard to specific borrowers.

An individual set of partners in each of transactions might vary and this is absolutely normal. If you have a look at Boeing and Airbus, you’ll see that supplies are funded by different set of banks. A whole financing industry is operating there. This is the case with Superjet.

- Is it possible to increase the extent of Russian banks’ participation in funding exports?

- It’s quite possible. Our transaction with regard to Superjet in Mexico is not the only one we have conducted in the past years. All transactions as I have already mentioned are of individual nature. In some cases Vnesheconombank acted as the sole creditor. And nowadays, a whole number of transactions are under consideration under which Vnesheconombank is planning to fund supplies on its own. Moreover, credits are also being prepared under which the Bank is planning to act as a member of consortium together with other financing institutions.

- Airlines need not only credits but also other instruments and above all operational leasing. Does Vnesheconombank Group have any relevant proposals in this respect?

- At present, we are working actively on expanding the set of instruments to fund supplies of aircraft. Forming up an effective instrument for operational leasing is one of our key tasks in the coming years. The reason for it is that Russian civil aviation planes are relatively new for international market. For most airlines operational leasing is the most effective method to feel the plane and see its advantages.

- As far as operational leasing is concerned, the lessor needs new competences associated with residual value management. Do you have partners capable of conducting such transactions?

- You were right saying that operational leasing has a number of significant special features if we compare it with financial leasing or with direct selling. In case of operational leasing, one of the main problems is the aircraft’s residual value because tenures of credits for purchasing aircraft for a leasing company might significantly exceed terms of leasing contracts. We are working actively with a whole number of investors and leasing companies in order to develop technical instruments that could allow us to minimize risks upon funding.

Talking about leasing companies, I have already mentioned that VEB-Leasing is a member of Vnesheconombank Group. We have already conducted transactions with this company on supplying aircraft abroad. At the same time, we are open for cooperation with all other leasing companies. We are also working hard with investment funds, other banks and government authorities.

- One of important factors for organizing operational leasing is a duration of a period needed to prepare a transaction…

- When we discuss aviation funding we are aware that each transaction is individual, so we can’t say that there is a standard funding period. On the other hand, our Mexican transaction shows that in terms of decision-making period and extending money we play by market rules and do not yield to our esteemed colleagues from Western countries. So, if we face low risks and deal with a good airline in an easy-to-understand market situation a decision-making period should not become a hindering factor.

- Do you consider projects on providing funding for other types of planes, for example, MS-21, helicopters?

- We hope that the market appearance of MS-21 will result in forming up a new important line of exports. As to other segments of aviation exports, we are actively involved not only in supplying new aircraft but also in funding spare parts for the already existing fleet of Russian and Soviet-made aircraft. From our point of view, this help to create new jobs and develop technological potential of our exporters.

You’ve mentioned helicopters. We believe that this line of activity will become one of our top priorities in aviation funding. Now we are considering several transactions related to helicopters. We hope that they will be closed successfully in the near future.

In general, from our point of view, Russian aviation industry has a tremendous export potential, which significantly exceeds the potential of the Russian domestic market. So, exports supplies will play a key role for the aviation industry’s further development in the coming years.

- A final question is about MAKS. What do you expect of the show?

- For us MAKS is very important and interesting salon where we can see many representatives of companies related to aviation in terms of manufacturing, funding, servicing and sales. So, this is a key event of the year for us. Both Vnesheconombank and companies comprising Vnesheconombank Group tend to sign quite many agreements in the course of the salon.

We expect important and interesting talks with leasing companies and aircraft makers because nowadays we are working on a number of interesting transactions on the supply of Russian aircraft. We hope that MAKS will help us to make significant headway on the projects. I’m sure that this salon will result in signing a number of agreements in the coming several months.