Transcript of the beginning of the meeting:
Dmitry Medvedev: Good afternoon again. Today we are holding the first meeting of the bank's Supervisory Board with several new members. The board now contains more of my deputies, who are responsible for work in the relevant sectors. I hope that they will help improve the efficiency of the Supervisory Board.
Please join me in congratulating Mr Dmitriev (Vladimir Dmitriev, Chairman of the Board of Vnesheconombank) on his new appointment, which was made on June 18. We wish you success in your work.
We have several major issues to discuss today, such as reviewing VEB's 2011 annual report and some others. It's been five years since the law which laid out the legal basis for the creation of Vnesheconombank was signed. On the whole, the bank has been a success as a development institution and has played an important role during the crisis. By the way, we just visited the dealing room, where we were able to watch transactions as they were being made, and we spoke about measures that were taken during the crisis to improve the situation and sustain the economy. Naturally the bank supported the real sector of the economy and the Russian financial system, focusing on areas such as upgrading the economy and promoting sustainable development of the Russian regions. Today Vnesheconombank operates as a development group and includes several specialised institutions, such as subsidiaries, specialised companies and several other organisations that share the same goal. VEB’s loan portfolio as a development bank has increased by 370% compared with 2007 when the bank was established and as of January 1 stood at 505 billion roubles. The bank is currently co-financing 112 investment projects, including modern factories, infrastructure facilities and a new passenger terminal at the international airport in Vladivostok, the automotive cluster in Kaluga, the modernisation of carriage building works in Tikhvin and several other projects. Investments into innovative projects account for more than one third of VEB’s portfolio. Finally, VEB is the founder of the fund managed by the operator of the programmes for funding innovative projects of the Skolkovo Foundation, known as the VEB Innovation Fund. Funds in the amount of 1 billion roubles will be released to carry out necessary scientific and technological expert analyses, develop plans for the commercial exploitation of innovative designs and prepare project documentation.
Last year the bank approved the strategy up to 2016. The performance indicators included in it are quite ambitious: the bank will invest about 2 trillion roubles, almost 2.5% of GDP, in the Russian economy until the end of 2015. First and foremost, we should focus on the goals that we have set ourselves. Just like in any other organisation, improving corporate governance and internal controls across the Vnesheconombank Group, as well as ensuring adequate transparency levels of corporate bodies is an important provision.
Opinions about VEB’s future as a state-owned corporation vary. I formulated a certain position some time ago. We should approach this issue in a balanced way. In the near future, we will need to decide what the state can do to relieve VEB of some of its responsibilities, so that the bank does not have to divert its resources for performing non-core functions. We will need to discuss all these questions in the near future.
I will just briefly describe two issues on the agenda so that you have the information. First, we will need to discuss the provision of a loan facility in the amount of 8.3 billion roubles for the reconstruction of Izhevsk Thermal Power Station 1. The project involves the construction of a modern combined-cycle plant at the existing plant to cover the deficit of heat and electricity supplies to Izhevsk. The borrower is TGK-5. Secondly, we will also need to consider a number of applications for funding the construction of Olympic facilities. All of them are included in the programme for the construction of Olympic facilities and the development of Sochi as a mountain resort.
Of course, these are not all the questions on today’s agenda. There are many more of them and most of them are fairly standard in nature. Let's get to work. Over to you, Mr Dmitriev. Please, go ahead.
Vladimir Dmitriev: Mr Medvedev and members of the Supervisory Board, first I would like to thank you for your assessment of Vnesheconombank’s activities. I realise that part of it is designed as encouragement, but let me to assure you that the bank’s workforce is professional enough to handle the tasks put before us.
In fact, a large number of items on today’s agenda are related to the activities of our subsidiaries, not just Vnesheconombank. We happen to be the only shareholder; therefore, all matters that need to be discussed at the shareholders’ meetings must be supported by the Supervisory Board as Vnesheconombank’s principal corporate governance body and, accordingly, by our subsidiaries.
The first item on the agenda is the approval of Vnesheconombank’s annual report. I want to state outright that we have followed all the compliance procedures established by Vnesheconombank that are necessary for taking issues to the Supervisory Board. First of all, the issue is about corporate governance bodies of our bank, the bank's executive board and working groups responsible for preparing materials for the Supervisory Board’s meeting. All items on today’s agenda were agreed during the July 3 meeting of working groups responsible for preparing materials for this Supervisory Board. We have ironed out all inconsistencies and disagreements so all the items on today’s agenda have been fully agreed with the relevant ministries and agencies and the shareholders who represented the interests of the Supervisory Board members to the working group. Therefore, we could go ahead and discuss each issue in detail, but because of time constraints I’d rather elaborate on specific items on the agenda that are, in my opinion, of material importance to us.
In particular, I would like to draw your attention to the funding of the construction of Olympic facilities. The point is that the draft resolution of our Supervisory Board regarding two facilities does not include a provision reflecting presidential instructions regarding the signing of agreements with Olimpstroy on the funding of projects, one of which is an investment project overseen by independent trade unions and the other is related to a project for which we haven’t yet signed an agreement with Olimpstroy. Therefore, we are including them today: Severspetsstroy and the project overseen by the Association of Independent Trade Unions of Russia.
The next issue that I would like to raise is also related to Olympic facilities. I am referring to the Roza Khutor project, the budget for which has significantly increased. We believe it would be justified from the point of view of securing Vnesheconombank’s interests and covering its risks to limit warranties of the organisations that are related to the project originators to 15% of their assets and excess costs, if the cost of the project exceeds the original amount for reasons beyond their control. This position has also been included in a draft decision of the Supervisory Board.
The next item that I would like to bring to your attention is related to a range of directives issued by the government and the prime minister on searching for ways to fund the projects of domestic heavy machinery and power engineering enterprises on terms and conditions that are competitive with those of foreign suppliers of equipment. As you know, our businesses lose out for one simple reason: they cannot keep up with the financial conditions dictated by foreign suppliers; financial terms are linked with repayment deadlines and, most importantly, with the cost of loans. So please issue instructions to Vnesheconombank and the relevant ministries and departments to consider the possibilities, including recommendations by the Central Bank, for lending terms that would match terms of financing offered by foreign exporters of equipment.
We have reached agreements on most of the other issues, and they are included in the draft resolution of the Supervisory Board. Of these issues, I would like to point out the issue of re-financing or reassignment to Vnesheconombank of the Baikal Pulp and Paper Mill’s credit debts amounting to about 2 billion roubles owed to Alfa Bank, RUSAL and some other lenders. The position of Vnesheconombank and the working group responsible for preparing materials for the Supervisory Board meeting is as follows: refinancing these loans or reassignment of the debts should be based on a state programme for the future of the Baikal Pulp and Paper Mill and a corresponding programme for its upgrade and rehabilitation, or shutting it down and dealing with the issue of waste, etc. Any other scenario would leave Vnesheconombank to pay back the loans to the plant’s lenders and be saddled with an unresolved and long-standing problem of what to do with the Baikal Pulp and Paper Mill. Please support the approach whereby Vnesheconombank helps pay back the Baikal plant’s loans on the condition that the government and relevant ministries and departments decide on the future of this enterprise.
I would also like to separately discuss confidential issues that we haven’t discussed at the working group meeting…
Dmitry Medvedev: All right, you can report on them confidentially then.
Vladimir Dmitriev: That covers all the issues that I wanted to discuss. If the Supervisory Board members have anything to add…
Dmitry Medvedev: Let’s get down to work.
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Before the meeting of the Supervisory Board Dmitry Medvedev visited the dealing room of Vnesheconombank’s currency and financial operations directorate and the exhibition of archive documents from VEB’s repository.
During his visit to Vnesheconombank, Dmitry Medvedev spoke with chairman of the bank Vladimir Dmitriyev.