VEB.RF in Partnership with Sber and Otkritie Bank to Provide Financing for Russia’s First Green Steel Mill

• A syndicate of commercial banks and VEB.RF will provide financing for the Ecolant megaproject in the single-industry town of Vyksa, Nizhni Novgorod Region
• Central Russia will have a large gas and iron ore consumer designed for high value-added production
• The project will create over 700 permanent jobs and an additional 2,000 for the period of construction
• Ecolant is compliant with current and potential international environmental standards and consistent with the agenda for reducing the carbon footprint

VEB.RF, Sber and Otkritie Bank are to provide financing for a project to build Europe’s first large integrated steel mill compliant with environmental standards. The financing agreements were signed by Igor Shuvalov, Chairman, VEB.RF; Alexander Vedyakhin, First Deputy Chairman of the Executive Board, Sberbank; Mikhail Zadornov, President & Chairman of the Management Board, Otkritie Bank; and Ecolant owner Anatoly Sedykh. The signing ceremony took place on 20 April 2021 in Vyksa, Nizhni Novgorod Region, where the project will be built. The project initiator is Ecolant LLC. The project includes the construction of an electrometallurgical facility and the necessary infrastructure with modern technology for the manufacture of steel, bars and high-quality slabs.

The total project value exceeds 140 billion roubles. VEB.RF, Sberbank and Otkritie Bank formed a syndicate to finance the project. The project will receive financing under the Project Financing Factory programme. VEB.RF’s share in the syndicated loan is 20 billion roubles, plus a reserve tranche of 20 billion roubles. Each of the other two syndicate members is to lend an additional 40 billion roubles. The project initiator will contribute more than 40 billion roubles.

“This is a project that is consistent with the green economic development agenda. The project will create production facilities that will meet the highest environmental requirements and contribute to reducing the carbon footprint in steel production. The syndicate of VEB.RF and commercial banks will invest through the Project Financing Factory. Together with the partners and the project initiator Ecolant, we’ll lay the foundations for the long-term competitiveness of the company, the single-industry town of Vyksa and the Nizhni Novgorod Region,” Igor Shuvalov said.

“Sber pays great attention to environmental issues and, in general, the ESG-based transformation of companies and industries. We are especially interested in the Ecolant project not only because of its significance for Russian steelmaking, but also because the project involves the use of best available technology such as DRI. Compared with blast furnace technology, it can substantially reduce energy consumption and greenhouse gas emissions,” Alexander Vedyakhin said.

“A sustainable approach to business financing and support for a green economy are now as relevant as ever. As a major steelmaker, the project initiator meets high standards of quality and environmental protection; and we are pleased to expand our cooperation. The lenders and Ecolant worked closely with each other to find an optimal investment solution and structure financing in such a way as to achieve the high credit quality of the ESG-compliant deal,” Mikhail Zadornov said.

“We have vast experience of carrying out large-scale, breakthrough projects. They wouldn’t have been possible without bank lending. Ecolant is our first large investment project solely with Russian funding. Russian banks have become competitive on a global scale. One of the largest investment projects in steelmaking will be an example of how to introduce technology that can give fresh impetus to the steel industry, improve the environment in industrial areas and ensure the further development of the Russian economy,” Anatoly Sedykh said.

Ecolant is a steel mill that does not use coke or blast furnace technology. Steel will be made using direct reduced iron (DRI) from iron ore and natural gas. The project is an integrated ore-to-steel facility including DRI, electric furnace and secondary refining equipment with an annual capacity of 1.8 million tonnes of steel, and two continuous-casting machines. Production is scheduled to start in 2025. Sheet steel will be intended chiefly for the manufacture of large-diameter main pipes and ships, as well as making seamless pipes for oil production and supplying feedstock for Europe’s largest rail wheel production at Vyksa Steel Works, part of United Metallurgical Company (OMK).