Meeting of the Vnesheconombank Supervisory Board
17 december 2012
Opening remarks by Dmitry Medvedev:
Dmitry Medvedev: Before we begin, I would like to say a few words. Today the Supervisory Board of Vnesheconombank is meeting for the last time in 2012, so it is time to review the past year’s work. It is obvious that the bank’s work as a development institution has been quite successful. The bank itself raised more than $5 billion in long-term financing on the financial market, and around $7 billion if we consider the consolidated results of the VEB Group, as I understand it. In addition, VEB floated Eurobonds worth over $1.7bn. These figures are encouraging because they reflect increasing confidence in this bank. I would like to thank the VEB staff for their contribution.
Vladimir Dmitriev (Chairman of Vnesheconombank): Thank you.
Dmitry Medvedev: Give them my regards.
Now on to the specific items on today’s agenda. First, we will consider the bank’s planned involvement in the financing of a business development programme for Russia’s largest automaker, AvtoVAZ, until 2020. The programme involves an upgrade of the company’s assembly equipment and development of new vehicle models. VEB is expected to contribute around 60 billion out of the required investment amount of 177 billion roubles. This will be a complex programme that includes more than one investment project. Each project will be subject to comprehensive appraisal before funding is provided. This practice should continue to be used.
There is another priority I would like to mention. VEB is actively working to support the development of the Russian Far East and Siberia. The last time we met, we agreed to increase the charter capital of the Fund for the Development of the Far East and the Baikal Region by 15 billion roubles, which will come from the federal budget. We also plan to recapitalise the Russian Direct Investment Fund, a subsidiary of VEB, by 62 billion roubles; 25 billion of that amount will be channeled into the Far Eastern projects.
We will also approve VEB’s income and expenditure plan for next year – the figures are generally in line with the bank’s strategy until 2015 – and consider the key performance indicators for the bank’s staff and executives, which should serve as incentives for meeting the bank’s strategic goals.
This is our agenda for today, but this is not all – we have a lot to discuss, as usual. Thank you.
* * *
Vnesheconombank Chairman Vladimir Dmitriyev responds to questions from the media after a VEB Supervisory Board meeting
Question: What questions were discussed?
Vladimir Dmitriyev: We had 15 items on the agenda concerning the bank’s credit and investment activities, such as report documents, next year’s budget and many other issues.
Let me mention them in order. I’ll start with the first item –a loan for the AvtoVAZ investment programme up to 2020. This deal was discussed as a result of decisions and a request from AvtoVAZ shareholders, including Renault-Nissan. An agreement on the investment programme was signed last week. It is within this context that we are considering a possibility of getting involved in this investment programme that is worth about 120 billion roubles. VEB could contribute up to 60 billion roubles. We discussed this 60 billion rouble loan figure today in terms of separate investment projects.
We agreed, anyway, on the main parametres of this credit deal today – the amount, the term of a package of loans for up to 10 years and the rates that will be reviewed for each individual investment project with due consideration for AvtoVAZ’s debt burden, and VEB’s liabilities in external and domestic markets and the interest rate subsidies under the Government’s decisions on Russia’s automobile industry.
I’d like to emphasise once again that in line with our bank’s normative documents, deals within the framework of this 60 billion rouble loan will be submitted for discussion by the Supervisory Board when they exceed five billion roubles. Transactions under five billion roubles will be reviewed by the VEB Board with due consideration for the afore-mentioned parametres.
The next issue we discussed was the Supervisory Board’s endorsement of the bank’s subsidies worth 62 billion roubles for the recapitalization of the Russian Direct Investment Fund (RDIF). We reviewed its high investment activities. Currently the fund has 25 specific deals in its portfolio and these deals’ total volume, as for RDIF own contribution, has amounted to$11 billion. Those deals, in which the co-investors have been determined and the investment documents, the structure of the deals and the contribution amounts have been prepared or are being finalized, as to RDIF own participation, make up $2.5 billion. Importantly, foreign co-investors are ready to contribute from between $4.5 billion to $5.5 billion to these deals. These funds will be invested in priority sectors of the RDIF (Russian Direct Investment Fund).
The next theme that was discussed today is the Vnesheconombank report, the non-financial VEB reporting we have been compiling for three years. In fact, VEB used to be a leader among companies with a public stake and state corporations on compiling and publishing a report of non-financial operations highlighting the bank’s priorities in environmental and social responsibility – that is, in the broader context of sustainable economic development and VEB participation in it. The report has been accepted and approved by the Supervisory Board.
Today we discussed the plan for next year’s incomes and expenses of the bank, that is, the bank’s budget. The Supervisory Board has approved its main parametres: loan portfolio growth and the growth of VEB's participation in investment operations. In the budget we can see the growth of the bank’s own funds due to a contribution to RDIF capitalisation and capitalisation of the Far East and Trans-Baikal Region Development Fund. Now again, as far as the RDIF is concerned, of the total 62 billion rouble investment, this year 25 billion will be channelled to projects in the Far East and in the Trans-Baikal Region under the decision of the Russian Government.
The Supervisory Board has approved next year’s budget with main growth parametres. We are guided by the idea that VEB is a special financial institution, a development institution which seeks to have no losses in its operations. Profit is not the main objective of our activities. Thus, we have asset profitability indicators which are characteristic for development banks – these indicators differ from the indicators of commercial banks, including banks with a public stake. But the main VEB indicator – capital adequacy – will exceed 10% next year.
Today, we also discussed the plan for our welfare and sponsorship activities, which total just under 3 billion roubles. We are channelling these funds to the main areas that had earlier been approved by the Supervisory Board, such as sport of high achievements and support of the Russian Orthodox Church and its projects, including in the spiritual education of young people. This includes healthcare, and social support of the poor and children with various diseases. It also includes culture and issues concerned with the Open Government activity, with the work on creating an international financial centre in Moscow, the North Caucasus and Russian Far East regional development programmes. All this is included in our programme, in the budget of welfare and sponsorship work, and all these areas have been supported by the Supervisory Board.
Today, at the Supervisory Board meeting, we discussed the personnel issue, as Pyotr Fradkov simultaneously had held two offices for a while – the office of the Head of the Export Credit and Investment Insurance Agency and a VEB Board Member – in order to synchronise bank operations on supporting industrial exports and the operations of the Export Credit and Investment Insurance Agency. This work has been concluded, and the General Director of the Export Credit and Investment Insurance Agency does not need to hold two offices at the same time. Therefore today, Mr Fradkov was relieved of his post as a Board Member at his will. Alexander Ivanov has become a Board Member and Deputy Chairman (he has held this post already). He controls the same areas in the bank that had earlier been the responsibility of Mr Fradkov. Of these, the main areas are the formation of a comprehensive system of support of Russian industrial export, involving all development institutions (VEB, the Russian Export-Import Bank and the Export Credit and Investment Insurance Agency of Russia; this includes work on attracting resources to international financial and capital markets, and to the work that has intensified recently. This work is concerned with interaction with national and international development institutions. You know that an interbank group has been created within the SCO. We have the same cooperation with development institutions in BRICS countries. We have made a proposal – supported by our foreign partners – to form a pool of institutions of development and export support within the G20. This proposal will be elaborated next year at the St Petersburg forum and at the events to be held as part of Russia’s G20 presidency.
These are the key issues that were discussed today. It is important for us that the Prime Minister, the Chairman of our Supervisory Board very much appreciated the activities of VEB employees and thanked them for their active work in his opening remarks. You have heard his speech.
Question: May I ask you a question concerning Avtovaz? When is the first tranche expected and what will it be used for?
Vladimir Dmitriyev: It is not clear. It has to do with the Avtovaz updating programme. It includes purchases of foreign equipment, re-equipment of existing capacities, but we have no investment projects yet. The decision concerns the levels of funding and the main conditions. The Board will discuss each specific project and the Supervisory Board will consider it when necessary. The sum total of all projects should not exceed 60 billion roubles.
Question: What are the rates?
Vladimir Dmitriyev: I have omitted the rates intentionally. I have mentioned the criteria.
They must conform to our borrowing terms. Regarding the ten-year period, there is simply no such benchmark on the Russian market.Consequently, it is impossible to make any estimates. But, on the other hand, we must, of course, take into account the potential of AvtoVAZ, its debt burden and specific terms for financing the company. At one point, the Government decided that AvtoVAZ must pay interest rates equal to the rate of refinancing, plus an extra 3%. At that time, the rate of refinancing was 8%. And, once again, we take into account the fact that specific rates are subsidised in line with investment programmes of the automobile industry. In the long run, we must establish rates that are seen as acceptable by Vnesheconombank, in order to ensure our break-even and loss-free operation and to help our borrowers. I am making this rather flowery statement, but, unfortunately, the details are still …
Question: May I ask you a question about the budget? You said that the 2013 budget has been stipulated. Could you tell us about the 2012 and 2013 profit estimate? And you said that 2013 loans have also been approved. So, could you tell us about next year’s borrowing volumes?
Vladimir Dmitriyev: You know, unfortunately, I don’t remember the statistics. I can tell you about profits. It appears that we will post 7-9 billion roubles in profit this year.
Remark: You have posted 32 billion in nine months …
Vladimir Dmitriyev: This is in line with consolidated International Financial Reporting Standards, but I am talking about the VEB performance in line with Russian Accounting Standards. Yes, as you have noted correctly, this implies a period of nine months.
Question: And what about 2013?
Vladimir Dmitriyev: We will conduct another inventory in 2013, but, on the whole, we proceed from the fact that 2013 profits will equal our planned profits for 2012.
Question: The media has reported that board members were to discuss an increase in maximum loan volumes for the Krasnaya Polyana project in order to complete the Gornaya Karusel (Mountain Carousel) Olympic facility. Why wasn’t this issue discussed? And is it true that VEB can increase or has increased maximum loan volumes for the Krasnaya Polyana project from 12 billion to 52 billion roubles, including loan-interest payments?
Vladimir Dmitriyev: This issue is not new. It has already been discussed, and decisions to increase the limit have, in effect, been made. Indeed, we are not discussing all issues of the VEB agenda today because we have to abide by certain limits. We must submit materials to meetings of the working group and the supervisory board within a certain number of days. But we also have a correspondence-voting procedure. Consequently, several more issues will be submitted before New Year’s Eve, including those which concern Olympic projects, and we expect to make decisions on them before the end of the year.
Question: As for Sberbank criteria regarding Olympic facilities, have you managed to settle the conflict somehow?
Vladimir Dmitriyev: What kind of claims?
Answer: A shareholder of the Krasnaya Polyana project and another shareholder, Mr Bilalov, are against this loan because the Krasnaya Polyana project will require additional capitalisation under this loan, because the share of inventory investors will be eroded, and so on.
Vladimir Dmitriyev: Let’s proceed from the fact that we are dealing with a shareholding borrower company. Apart from Sberbank, several other companies have a stake in it. And, consequently, our decisions must be coordinated with corporate decisions due to be adopted by the shareholders of this company. That’s why I cannot tell you anything else. This means that they must sort things out between themselves. We are not involved in this conflict, if it can be called a conflict, or this situation or incident.
Question: May I ask you a question concerning borrowing? You wanted to raise $800-850 million worth of syndicated loans this year. Will you manage to raise this loan before the year is out?
Vladimir Dmitriyev: I cannot tell you.
Question: And do you plan to operate on foreign markets next year?
Vladimir Dmitriyev: Sure.