Vnesheconombank’s Participation in the International Economic Forum in Davos

Foreign investors were greatly interested in the Russian President’s proposals for setting up a fund

DAVOS /Switzerland/, January 27. /ITAR-TASS/. Foreign investors were greatly interested in Russian President Dmitry Medvedev’s proposals for setting up a Direct Investments Fund, which is to share risks with investors. VEB Chairman Vladimir Dmitriev told journalists about it. He is a member of the Russian delegation at the World Economic Forum in Davos.

“This is going to be significant capital”, he said, refusing to specify this new Fund’s capital size, PRIME-TASS reported.

Speaking at the Davos Forum the day before, Dmitry Medvedev said that a sovereign fund would be set up in Russia and that it would share risks with foreign investors. “In the near future a special sovereign fund is to be set up and it is to share risks with foreign investors through joint investments in projects to modernize the Russian economy”, he said.

VEB plans to borrow in six currencies in international markets in 2011

DAVOS (Switzerland), January 27 – RIA Novosti. Vnesheconombank is determined to raise funds in six currencies in 2011 – in dollars, rubles and euros in the first place as well as in yens, pounds and Swiss francs, VEB Deputy Chairman Petr Fradkov told journalists about it.

About 1 billion dollars out of the total sum can be raised with the help of ruble instruments.

In the current year a total amount of loans can remain at the level of 2010 – 8 billion dollars.

VEB’s borrowing program for 2011 is to be approved by the Bank’s Supervisory Board.

“The Eurobond situation is likely to worsen as spreads will rise”, added Fradkov.

VEB can start to sell Globex’s assets as early as this year

DAVOS, January 27 – RIA Novosti, Maria Knyazeva. Vnesheconombank engaged in rehabilitating Bank Globex can start to sell assets received from this bank during its financial rescue including real property as early as this year, VEB Chairman Vladimir Dmitriev told RIA Novosti about it on the outskirts of the World Economic Forum in Davos.

‘This year we may sell those (non-core) operating assets that we purchased while rehabilitating Globex and Svyaz-Bank. Here I mean collaterals on credits that proved to be bad and moreover real property assets purchased in favor of VEB Capital in the course of rehabilitating Globex Bank”, he said.

Dmitriev didn’t specify the sum that could be received from selling assets and the size of Globex’s debt that could be settled.

“It’s not a matter of repaying debts but it’s a matter of developing assets that have not been brought up to a selling condition”, he said.

Thus VEB is to re-invest funds received from selling assets in Globex’s existing facilities.

“We are doing all these things with a view to selling Globex in the future either through IPO or through strategic investors. But this is a distant prospect – at least three years from now”, he said. Globex’s future should be decided in parallel with those serious assets that are in need of significant investments before they are brought up to a selling condition”.

In the current year VEB is not planning to early repay the Central Bank’s credit received for rehabilitating banks including Bank Globex”, Dmitriev added.

Bank Globex was founded in 1992. VEB purchased Globex in late 2008 as part of measures for stabilizing the banking sector. The Central Bank financed the rehabilitation of this credit institution in the amount of 87 billion rubles.

VEB should sell European concern EADS stake at a break-even price

DAVOS /Switzerland/, January 27, /PRIME-TASS/. VEB should sell European concern EADS stake at a break-even price. Vnesheconombank Chairman Vladimir Dmitriev told journalists about it. He explained that VEB’s withdrawal from the project which the Bank regards as a non-core asset should be made on a break-even basis. So, the state corporation does not intend to hurry to sell the asset expecting changes on the market.

It was reported earlier as quoted by the source close to Vnesheconombank that VEB was ready to sell European aerospace and defense concern EADS’s stake to the United Aircraft Construction Corporation at a price lower than the purchase price paid by VEB.

“In theory we are ready to sell at a price lower than the price we paid for EADS stake but we should not suffer substantial losses”, said the source. He noted that VEB had already gained good profit from EADS from dividends.

According to the source we shouldn’t expect EADS’ shares price to come close to the price, at which they were purchased but at the same time it said that you never knew how the market would develop. In general, the situation with Airbus is rather complicated, on the one hand they show significant losses but on the other they have a big backlog of orders. Somehow they are ahead of Boeing”, said the source in the agency.

As PRIME-TASS reported earlier, VEB is going to sell EADS’ five-percent stake to the United Aircraft Construction Corporation but everything hinges on the price of VEB’s stake: VEB does not want to sell EADS’ shares at the current market price; the United Aircraft Construction Corporation does not want to pay up the shares at par value.

It was reported earlier that according to VEB’s financial statements, it owns 5.0448 percent of EADS’ shares. VEB bought these shares in late 2007 for 995 million euros from VTBR, which in its turn purchased them for 1 billion euros in the summer of 2006.

VEB is not to participate in buying out Nornickel’s shares from RusAL – Dmitriev

Davos. January 27. INTERFAX – Vnesheconombank is not to participate in buying out shares of OJSC Norilsk Nickel (RTS:GMKN) from RusAl if such a transaction takes place after all, VEB Chairman Vladimir Dmitriev told journalists about it.

V. Dmitriev said that no matter how the situation in Nornickel developed this project would for sure do without us and explained that by law VEB was prohibited from financing a buyout of one shareholder by the other.

It was reported earlier as quoted by the sources that OJSC Nornickel could make a new proposal to RusAL for buying out its blocking stake. It was not ruled out that a bid price could be lower or the company would offer to buy out a lesser amount of shares. The previous offer worth 12 billion dollars was turned down by RusAl.

According to the sources Nornickel has already agreed with a pool of banks headed by a large Western bank on extending funds to finance this transaction. The names of the banks were not mentioned.

They started to extensively discuss a buyout of Nornickel’s shares by one shareholder from the other or by Nornickel itself as early as last year when it became clear that the shareholders conflict was not likely to be resolved amicably. Both RusAl and Interros stated their intention to buy out shares. RusAl failed to make a concrete offer after all. Interros offered to buy for 9 billion dollars.

During the shareholders conflict RusAl said more than once that it was not determined to sell Nornickel’s shares because it regarded them as its strategic investment. Nevertheless, as it was reported as quoted by the source such major RusAl’s shareholders as Mikhail Prokhorov and Victor Vekselberg argued for selling the stake. V. Vekselberg has said recently that as RusAl’s Board Chairman he is expecting a new proposal for buying out Nornickel’ stake.

VEB does not refuse to set up a Postal Bank and is to appraise the financial component of the Post of Russia

Davos/Moscow. January 27. INTERFAX-AFI – Vnesheconombank (VEB) does not refuse to implement the project to set up a Postal Bank in Russia and is to appraise the financial component of the Post of Russia, VEB Chairman Vladimir Dmitriev told journalists about it.

“Nobody has cancelled the Postal Bank project”, he said. V. Dmitriev added that the fact the Post of Russia’s financial business was valued at 100 billion rubles radically changes potential partner banks’ idea of their participation share amount in the project.

VEB’s Chairman stressed that at present the Bank was inviting its appraisers to appraise the value of the Post of Russia’s financial component.

At the start of last December V. Dmitriev said that the parameters of the transaction on engaging a strategic investor in the Postal Bank should be reconsidered due to the need to appraise the value of the Post of Russia’s business in providing consumer financial services. KPMG Company appraised this line of Post of Russia’s activity at 80-100 billion rubles. Now VEB is selecting a partner for setting up a Postal Bank considering proposals by Russian Standard and Nomos-Bank (RTS: NMOS). A requirement imposed on partners is their readiness to financially participate in the capital of a credit institution to be created including a buyout of additional shares issues in the amount of no less than 25% but no more than 50%.

We also discuss with partner-banks how to compensate the Post of Russia for its loss of incomes resulting from transferring its financial operations to the Postal Bank and how to compensate for VEB’s expenses on rehabilitating Svyaz-Bank (RTS:SVZB) on the basis of which the project is planned to be implemented. The Russian Central Bank allocated 125 billion rubles to VEB to rehabilitate Svyaz-Bank.

“The Post of Russia goes along with VEB’s intention to make a new appraisal of its financial business”, said Post of Russia Director General Alexandr Kiselev talking with journalists in Moscow. “I’m absolutely convinced that this is the right thing to do, we welcome it warmly”, he said.

“The more objective this appraisal will be, the better for us”, said A. Kiselev. According to him the Post of Russia will also participate in preparing this appraisal.

At present, according to the 2010 performance the Post’s financial business is already appraised at 95-120 billion rubles, said its Director General.

A. Kiselev hopes that a scheme for setting up a Postal Bank will be drawn up in the immediate foreseeable future.

He confirmed that the plans of setting up a Postal Bank had remained unchanged adding that tactics hinge on several things. The Federal State Unitary Enterprise cannot directly participate in a credit institution’s capital. If a decision to convert the Post into a joint stock company is made this year the Post’s conversion into a joint stock company with a 100 percent state participation could be completed in 2013-2014, believes A. Kiselev.

At the same time he said that the Post’s conversion into a joint stock company was not a mandatory requirement for setting up a Postal Bank.

The amount of VEB’s borrowings for 2011 will remain unchanged from 2010 and will be about 8 billion dollars – Dmitriev

DAVOS /Switzerland/, January 27. /PRIME-TASS/. The total amount of VEB’s borrowings for 2011 will remain unchanged from 2010 and will be about 8 billion dollars. VEB Chairman Vladimir Dmitriev told journalists about it at the World Economic Forum in Davos.

He said that VEB planned to make borrowings in five currencies: euros, dollars, yens, British pounds and Swiss francs. He also said that the eurobond situation would worsen because spreads would rise. About 1 billon dollars out of the total sum are to be borrowed through ruble instruments, said V. Dmitriev.

Just to remind that in 2010 the total amount of VEB’s borrowings was 8.2 billion dollars: 3.2 billion dollars were borrowed through issuing eurobonds, 25 billion rubles and 1 billion dollars – through placing bonds on the domestic market. About 1 billion dollars were raised in the form of syndicated loan and then another 2.5 billion dollars were raised in the form of tied loans among other things against export agencies’ coverage.

“The eurobond situation would worsen because spreads would rise”, said VEB’s Chairman in Davos.

V. Dmitriev said that nobody had cancelled the Postal Bank project. And he also added that the appraisal of the Post of Russia’s financial business in the amount of 100 billion rubles changed radically potential partner-banks idea of their participation share value in Postal Bank project. At present VEB is inviting its appraisers to appraise the Post of Russia’s financial business.

2-3 years from now the state could start considering an issue of selling Bank Globex (GLBX01), Vladimir Dmitriev told journalists about it in Davos. According to him they can sell the bank only after its assets are put in order and appraised. And in V. Dmitriev’s opinion it will take 2-3 years.

Just to remind that in 2008 the Bank of Russia placed a deposit of 87 billion rubles for rehabilitating Bank Globex. In its turn VEB committed the funds to VEB-Invest, an SPV company. VEB-Invest bought out problem assets of Globex.

Earlier Globex Bank President Vitaly Vavilin said that the bank planned to fully repay its debt to the state within 6 years stressing that this 6-year period could be shortened.

A decision on selling the bank is to be taken by the shareholder. The bank’s management is to work off invested funds, stressed V.Vavilin. He also added this couldn’t be done only through generating high profits. “We can work off the money, above all, through capitalizing the available assets and selling them”, V. Vavilin said.

“Our objective today is to maximally increase the bank’s capitalization”, stressed V. Vavilin. According to him several factors influence the bank’s value: an internal factor, that is, capitalization growth, which the bank can control, and an external factor, that is, market conditions, purchase and sale coefficients in the banking sector. Before the crisis M&A transactions were conducted with a capital multiplier of 3.5 - 4, said the bank’s President. V Vavilin hopes that by the time of Globex’s sale transaction will be conducted with a capital multiplier of 3.

“If five years from now a capital multiplier is about 1.5, this will mean a tragedy for the state and we’ll face a very serious crisis. I think that this will not happen. I believe the market will be different and a capital multiplier will be about 3”, said the bank’s president. “But if multipliers remain low Bank Globex has a sort of safety belt, that is, assets on VEB-Invest’s balance sheet”, said V. Vavilin. “In principle, the bank’s expenses could be covered through selling these assets and through Globex Bank’s value recalculation even if a capital multiplier remains low”, he said. “In any case, the state will get its funds back – either in the form of money or in the form of assets”.

V. Vavilin said that a year ago they explored an issue of selling the bank. At that time the bank invited Credit Suisse Investment Bank to appraise the credit institution. “They wrote their opinion, which confirmed our forecast – if the bank is sold 4 years from now it will cover the state’s expenses on its rehabilitation”, said the bank’s president.

V. Vavilin didn’t rule out that in 2011 Bank Globex would raise VEB’s syndicated loan worth 5 billion rubles. “Perhaps we’ll ask the shareholder for a syndicated loan”, he said. Specifying the loan’s amount V. Vavilin said: “I think no more than 5 billion rubles for a period of more than 5 years”.

When asked in Davos about the Traktornye Zavody Concern V. Dmitriev said that they would manage it. 

According to the Russian mass media VEB has received the Russian Federal Antimonopoly Service’s authorization for purchasing 100 percent of the Traktornye Zavody’s shares. This authorization enables the Bank to extend a credit worth 15 billion rubles under REPO transaction to restructure credits and launch a new production facility in Chuvashia. The Tractornye Zavody Concern is the largest manufacturer of off-road vehicles, equipment and components for heavy and light mechanical engineering.

As far as EADS is concerned V. Dmitriev said in Davos that the Bank’s withdrawal from this project viewed by VEB as a non-core asset should be made on a break-even basis and so they have to wait until market conditions change.

V. Dmitriev said that no matter how the situation with Nornickel developed the project could do without the Bank and that by law VEB is prohibited from financing a buyout of one shareholder by the other.

VEB’s Chairman noted that investors were interested in Russian President Dmitry Medvedev’s proposal for setting up a fund of direct investments which is to share risks with investors. “This is going to be significant capital”, he said refusing to specify the amount of the new fund’s capital.

The Growing Russian Economy

CNBC interviewer: We are joined by Vladimir Dmitriev, Chairman of Russia’s Bank for Development, Mr. Dmitriev, thanks so much indeed for joining us. Just how much did the drought last year affect the economy, how much of a drag did it put on the Russian economy, are we still feeling the effects of that drought?

Vladimir Dmitriev: Well, of course the economic crisis severely harmed the Russian economy. But in spite of that I think Russia is on the right track. We see growing economic development, we see growing GDP, we see growing industrial production, and what is encouraging for me is the announcement of our President about setting up a special investments fund in Russia which should be focused on economic development in Russia with the help of Wealth Fund and which will give appropriate signals to foreign investors to come to Russia and invest in Russia.

CNBC interviewer: Does the plan provide for foreign investors to come and invest money and receive some money from the fund and invest jointly with their Russian partners?

Vladimir Dmitriev: The plan is to engage investors into our country and to prevent risks through this fund’s participation in individual projects. This is a case-by-case approach to engaging foreign investors. And the Russia Federation will be involved in this fund and foreign investors will participate in implementing specific projects.

CNBC interviewer: I think that that the biggest problems for Russia in engaging foreign investors are associated with corporate governance and the rule of law. How are you addressing these issues? Big companies are coming up against problems. For example Shell and BP. BP has now struck a deal with Rosneft.  Foreign investors face serious problems. What would you like to tell them?

Vladimir Dmitriev: I like your question. Taking into account that our institution is one of the main instruments of the government and the fact that foreign investors are sometimes frightened by the issues you pointed out, what they really need is assistance provided by state-owned institutions at a local level. Vnesheconombank, the Bank for Development, is a sort of local guidance for them. We are going to manage investments and tell foreign investors about existing risks and ways of dealing with them.

CNBC interviewer: Mr. Dmitriev, thank you very much indeed for your time. The Chairman of Russia’s Bank for Development.

VEB is determined to increase the proportion of credits to finance innovation projects to 20 percent

MOSCOW, January 28, /ITAR-TASS/. Vnesheconombank is determined to increase the proportion of innovation projects in its loan portfolio to 20 percent, said Vnesheconombank Chairman Vladimir Dmitriev on the outskirts of the Economic Forum in Davos.

“In our Bank’s new strategy up to 2015 we set ourselves a task to increase the proportion of innovation projects in our loan portfolio to 20 percent”, said Mr. Dmitriev in his interview to the TV channel Russia 24. According to him this proportion now is about 15 percent.

At a meeting with Russian President Dmitry Medvedev in May of 2010 VEB’s Chairman said that VEB was determined to enhance cooperation with companies operating in the innovation sector. “This line of activity is set forth in our new strategies for 2010-2014”, said Mr. Dmitriev. We intend to reconsider our attitude to modernization and innovation projects.

The Russian Development Bank /VEB’s subsidiary/ has already got down to implementing the Program “Financing for Modernization and Innovation”. This Program calls for providing support for companies operating in the innovation sector. Under the Program credits are to be extended to these companies in the amount of up to 150 million rubles for at least 7 years and a credit rate is to be two thirds of the Central Bank’s refinancing rate.