Attracting foreign investments and technologies

Attracting external investments, foreign technologies and talents to the Russian economy to promote projects that are of strategic importance for Russia lies at the heart of our efforts to expand the range of economic and geopolitical influence of the Russian Federation in the international context, reinforce its international relations and engage in the international exchange of experience and expertise in the financial sector. As a development bank, Vnesheconombank interacts with major international development institutions whose operations meet the Bank’s strategic priorities and focus on stronger economic relations.

Attracting foreign investments

From sustainability standpoint, innovation and infrastructure development, environmental protection and energy efficiency are priority areas in Vnesheconombank’s cooperation with international institutions and financial organisations in terms of attracting foreign investments in joint projects in Russia to encourage the country’s economic growth.

In 2013, Vnesheconombank signed a number of agreements with foreign banks as part of structured financing deals. The agreements provide for medium- and long-term loans for a total of about USD 2,932 mn to be extended to finance 12 large-scale investment projects in Russia. The largest loans from foreign banks were used to finance the project for construction of the Boguchany Aluminium Smelter for USD 700 mn with a total maturity of 5 years, and the project for construction of a multifunctional facility in the territory of MJSC Slava (Second Watch Factory) for USD 800 mn with a total maturity of up to 6.5 years.

In 2013, we also issued 4 series of Eurobonds for a total of USD 2 bn and EUR 1.5 bn. The proceeds from the Eurobonds were used to finance the Bank’s priority projects.

The cooperation agreement signed between Vnesheconombank and the international investment group Adams Street Partners in 2013 became an important milestone in Vnesheconombank’s efforts to attract foreign investments for the Russian economy. The agreement envisages a wider access by Russian businesses to long-term financial resources in the form of direct investment and mezzanine debt.For this purposes, the parties are planning to set up a joint Fund of Funds that will operate via private equity funds. Resources offered by the Fund of Funds will be available to Russian and European Russia-bound investment funds with successful business history.

The operations of the Fund of Funds will be aligned with key areas of the EU/Russia Partnership for Modernisation initiative and will expand horizons for practical interaction between Russia and the EU.

A key role in attracting foreign investments in the Russian economy will be played by VEB Asia Ltd. incorporated in Hong Kong in 2013. The company with an authorised capital equivalent to USD 30 mn is 100% owned by Vnesheconombank. The key objectives of the company consist in:

engaging Asian investors in financing ambitious projects in Russia;
supporting Vnesheconombank’s operations in terms of relations with investors in the Asian market;
assisting Russian companies in accessing Asian capital markets;
promoting Russian industrial exports to the markets of East and South-East Asia, including in cooperation with EXIAR.

Relations of Vnesheconombank with international financial organisations and development institutions

In 2013, Vnesheconombank continued its active relations with major international financial organisations and regional development institutions both on a bilateral basis, and in the framework of relevant unions, clubs and associations. As such, the Bank represented the interests of the Russian financial sector abroad, participated in the preparation of international sectoral standards and shared experience in leading-edge banking technologies and products.

Vnesheconombank was fully involved in a number of events that are important for the Russian economy such as Saint Petersburg International Economic Forum, Krasnoyarsk International Forum, and Davos Economic Forum. The Bank also initiated and organised the Sustainable Growth through Long-Term Investments international conference.

Vnesheconombank’s initiatives on cooperation with international development institutions in 2013

BRICS interbank cooperation	In 2013, partner banks under BRICS’s interbank cooperation mechanism signed the Multilateral Infrastructure Co-financing Agreement for Africa and the Multilateral Agreement on Cooperation and Co Financing for Sustainable Development. The key objectives of BRICS for the coming period include improvements to the mechanisms of lending in national currencies and cooperation in co-financing of investment projects.
Interbank Consortium of the Shanghai Cooperation Organisation (SCO IBC)	In 2013, SCO IBC adopted the Regulations on the Operating Procedure of SCO IBC’s Working Group for Examination of Joint Investment Projects and the Mechanism of Guarantees and Investment Insurance. The key mid-term objectives of SCO IBC include improving the mechanism of joint project activities, enhancing efficiency of relations with the SCO Business Council and authorised financial institutions of countries that have respective statuses in the SCO and analysing the potential expansion of relations with other economic entities and financial institutions operating in the SCO’s framework.
EU and Russia Partnership for Modernisation initiative	In 2013, as part of cooperation with European development institutions on the EU and Russia Partnership for Modernisation initiative, Vnesheconombank signed 2 loan agreements with the European Investment Bank (EIB) for up to EUR 200 mn and up to USD 150 mn. The agreements provide for loans to be issued to Vnesheconombank to implement SME support projects.
Creation of the Moscow International Financial Centre (MIFC) in Russia	In July 2013, Vnesheconombank hosted the 5th meeting of the MIFC UK-Russia Joint Liaison Group (JLG). At the meeting the parties discussed current issues related to the following areas of JLG operation: development of the derivatives market; operations with securities; and expansion of public private partnership mechanisms. The parties also discussed alternative justice; improvements to the legal regulatory and adminstrative environment; education, training and certification of professional financial market players; and specifics of branding, marketing and public relations with respect to MIFC creation. As a result of the meeting, the parties agreed to continue their relations in the above areas on a regular basis.
Association of Development Financing Institutions in Asia and the Pacific (ADFIAP)	In 2013, Vnesheconombank joined ADFIAP as a full member with a voting right. As such, the Bank will have the right to participate jointly with other members of the Association in the financing of projects in such areas as infrastructure, environment, energy efficiency, social development, microfinancing and financing of SME projects. The meeting of the General Assembly of ADFIAP held in December 2013 resolved to admit Vnesheconombank to the Board of Directors of ADFIAP. In 2014, Vnesheconombank will host the 37th Annual Meeting of ADFIAP in Moscow.
North-East Asia Exim Banks Association	In 2013, Vnesheconomabnk joined the North-East Asia Exim Banks Association set up within the framework of the Enlarged Tumangang Initiative to support project implementation in Mongolia, South Korea, China and Russia, including to set up transport corridors. During the year, Vnesheconombank participated in the Association’s events that were intended to determine its key goals, objectives and strategic benchmarks, and identify projects for potential joint financing in member countries of the Association.
International Financial Corporation (IFC)	In 2013, Vnesheconombank signed a consultancy agreement with IFC under which IFC surveyed the market of energy efficiency projects and prepared draft regulations on a banking product designed to finance energy efficiency projects. In 2014, as part of this area of relations with IFC, Vnesheconombank is planning to complete the development of a specialised banking product that provides for assessment of energy efficiency of investment projects financed by the Bank, build a portfolio of energy efficiency projects for potential financing by IFC and other investors, and hold focused training events for relevant professionals of the Bank. Moreover, in 2013, Vnesheconombank and IFC signed a Memorandum of Understanding intended to expand their relations across a range of areas, including potential joint financing of projects in Russia, primarily projects that provide for development of knowledge-intensive green and safe production facilities, waste recycling and waste water treatment. Priority projects also include those aimed at developing the energy sector, enhancing energy efficiency, upgrading infrastructure and raising the quality of public utility services.
IBRD	As part of cooperation with the International Bank for Reconstruction and Development (IBRD) that is a member of the World Bank’s Group, Vnesheconombank intensifed its borrowings to finance infrastructure and energy efficiency projects that can be potentially financed with IBRD’s loans. The loans for such projects are planned to be taken in 2014 — 2015. In 2013, IBRD also took practical steps to provide Vnesheconombank with consultancy services as part of setting up the Regional Innovation Observatory (InnObs). Its launch will allow monitoring and raising awareness about innovation activities in Russian regions, and planning and implementing regional innovation strategies and programmes.
KfW bank group	In 2013, Vnesheconombank and KfW signed a Memorandum of Understanding to promote the solid waste disposal sector in Russia based on conservancy and environmental friendliness principles. Vnesheconombank also continued its work with KfW and the Permanent International Secretariat of the Council of the Baltic Sea States on implementation of the Tripartite Memorandum of Understanding of 2012. The Memorandum provides for financing of two large projects on support for innovation activities of small and medium enterprises, and for environmentally friendly recycling of municipal solid waste in Saint Petersburg.
Nordic Investment Bank (NIB)	In 2013, Vnesheconombank signed a loan agreement with NIB for up to EUR 50 mn to finance energy efficiency projects mainly implemented in the North Western Federal District. Vnesheconombank also joined the Russia Energy Efficiency Programme developed by NIB. The programme provides for, among other things, training of Vnesheconombank’s employees on evaluation of energy efficient projects in 2014.

Key operating results of the Russian Direct Investment Fund for 2013

RDIF is the first, and the only of its kind, sovereign fund established in Russia in 2011, with the support by the government, to attract foreign investment in major companies in the most rapidly growing sectors of the Russian economy. In its investment operations, RDIF relies on the mechanism of mandatory co-investment by leading financial and strategic investors in an amount equal to, or exceeding, the contribution by RDIF. The Fund’s assets are managed by LLC RDIF Management Company, a 100%-owned subsidiary of Vnesheconombank.

RDIF acts as a co-investor and a partner of international private equity funds, sovereign funds and major strategic investors that directly invest in Russian companies. RDIF shares the risks with its co-investors and seeks to obtain maximum return on invested capital.

In making its investment decisions, RDIF takes into account a number of factors that are viewed as priority areas for financial support by the Fund:

robust opportunities and requirements for investment in infrastructure;
import substitution;
sectors where Russia can boast notable competitive advantages;
opportunities for a fundamental increase in enterprise efficiency.

To achieve its core objective of attracting foreign direct investment, human resources and technologies in the Russian economy, RDIF also places a special emphasis on building an attractive investment case for Russia, improving the investment environment and fostering financial activity in the country.

In 2013, RDIF signed a number of agreements with foreign investors on building long-term strategic partnerships to set up joint investment funds and platforms.

Investment raised in joint platforms and funds under agreements signed (USD / EUR mn)

Joint platforms and funds

A joint fund with the UAE’s sovereign fund Mubadala	RDIF and the UAE’s sovereign fund Mubadala announced that they had set up a joint fund. Its assets under management (AuM) are planned to reach USD 2 bn. The fund’s core goal will be to make joint investments in long-term projects in various economic sectors of Russia.
Russia-China Investment Fund	RDIF and China Investment Corporation (CIC) set up a joint Russia-China Investment Fund, with a capital of USD 2 bn. 70% of this amount will be invested in Russia. Chinese and international investors in the Fund’s capital are expected to invest up to another USD 2 bn.
Russia-Italy Investment Platform	RDIF and Fondo Strategico Italiano (FSI) signed a memorandum setting up the Russia-Italy Investment Platform, with the planned AuM amount of EUR 1bn. The Platform will invest in businesses and projects that promote stronger foreign trade and foreign direct investment between Italy and Russia.
Russia-Korea Investment Platform	RDIF and Korea Investment Corporaton (KIC) signed a memorandum setting up the Russia-Korea Investment Platform. The Platform will invest in businesses and projects that facilitate foreign trade and investment relations between the countries. It will identify investment-attractive projects in bilateral trade and other areas that meet Russian and Korean strategic interests.
Russia-Japan Investment Platform	RDIF and Japan Bank for International Cooperation (JBIC) signed a joint memorandum setting up the Russia-Japan Investment Platform. Each country invested USD 500 mn in the Platform. As part of this initiative, RDIF and JBIC are planning to invest across a range of areas in trading and economic relations between the two countries, including projects in the Russian Far East and Eastern Siberia.

Sustainability Report 2013

Attracting foreign investments and technologies