Memorandum of Understanding Between State Corporation «Bank for Development and Foreign Economic Affairs» (Vnesheconombank) and the European Bank for Reconstruction and Development

State Corporation "Bank for Development and Foreign Economic Affairs" (Vnesheconombank) (hereinafter “Vnesheconombank”) and the European Bank for Reconstruction and Development (hereinafter EBRD), hereinafter collectively referred to as the Parties, for the purpose of developing mutually beneficial co-operation in support of Partnership for Modernisation, launched by the European Union and the Russian Federation at the 25th summit on 31 May 2010 (hereinafter referred to as the Partnership), whereas:

Federal Law On Bank for Development No. 82-FZ of 17 May 2007 obliges Vnesheconombank, among other things, to contribute to raising the competitiveness and diversifying the economy of the Russian Federation, to support investment activities, to implement projects aimed at developing infrastructure, innovations, protecting the environment and supporting the development of small and medium-sized enterprises;

EBRD in accordance with its Strategy in Respect of the Russian Federation approved by the Board of Directors of EBRD at the meeting on 3 December 2009, intends to support economic diversification and competitiveness of the Russian economy through the financing of investment in modernisation and innovations, the reduction of energy losses and greenhouse gas emissions, transport development, urban and energy infrastructure, by contributing to direct foreign investment and expanding support for the sector of small and medium-sized enterprises;

the Partnership Working Group aims to support pilot projects and investment in top-priority areas by strengthening partnership with the international institutions; the goals of the Partnership include, but are not limited to, expanding opportunities for investing funds in key sectors, encouraging growth and innovations, increasing and deepening bilateral trade and economic relations, supporting small and medium-sized enterprises, developing the transport, developing economically, contributing to the shaping of sound low-carbon economy and energy efficiency. These intentions are compatible with the intentions and authority of the Parties;

reach mutual understanding of the following issues:


Section 1

Purpose

This Memorandum outlines the intentions of Vnesheconombank and EBRD concerning co-operation in support of the projects within the framework of the Partnership. Upon the terms and conditions specified in section 4 below, the Parties shall consider allocating a sum up to 500 million USD each to finance the development of the projects within the framework of the Partnership meeting the requirements of both Parties.


Section 2

Potential Fields of Co-operation

Joint efforts shall focus on projects in the following top-priority areas provided for by the Partnership and listed in the Partnership Action Plan:

  • - Energy efficiency: energy conservation and renewable energy sources, clean coal production and processing technologies, the use of associated gas and methane, carbon dioxide capture and storage, energy efficient district heating and activities aimed at increasing energy conservation in buildings, energy efficiency in energy production, transmission and distribution;
  • - Transport: assistance in transport integration within the framework of the Northern Dimension Partnership on Transport and Logistics and the Central Axis Partnership, co-operation on marine transport and the development of multimodal transportation and routes, the implementation of the Intelligent Transportation Systems and road safety improvement, the development of high-speed railway network between Russia and the EU;
  • - Small and medium-sized enterprises: support for innovation initiatives related to small and medium-sized enterprises, including business incubators, research parks, business technology centres; support for financial services to small and medium-sized enterprises (venture capital funds, lending, microlending, etc);
  • - Commercialisation of innovations in sectors such as pharmaceuticals, energy efficiency, environmental protection and transport.

Section 3

Co-operation Under Projects

The Parties hereby confirm their intention to work together on the projects being developed within the framework of the Partnership meeting the strategic goals and financial criteria of both institutions.

To that end, the Parties shall:

  • - review potential projects in the above-listed fields initiated by the European and Russian companies for implementation in Russia within the framework of the Partnership and proposed to the parties by the Ministry of Economic Development of the Russian Federation or other authorities capable of playing a coordinating role in the Partnership;
  • - exchange information and the results of legal and financial expert review in respect of such projects provided that they are kept confidential to identify co-financing opportunities;
  • - develop consistent approaches to project structuring and implementation.

Section 4

Project Criteria

The Parties shall assess potential projects on a-case-by-case basis to ensure that they meet the lending and investment criteria of the Parties, including, but not limited to:

  • - support for experienced, creditworthy and reputable sponsors;
  • - commercial viability of the proposed investment;
  • - transparent structure and financial information;
  • - compliance with the environmental protection and procurement standards of the Parties;
  • - satisfactory financial structure and collateralisation.

This Memorandum of Understanding is intended to set forth the fundamental principles under which projects shall be prepared by EBRD and Vnesheconombank within the framework of the Partnership. The extension of any financing by Vnesheconombank and EIB shall be subject to mandatory assessment of specific projects, formal approval by the duly authorised management and Boards of Directors of both Parties, the discussion and implementation of proper financial documentation and the fulfillment of all relevant conditions precedent.

Final financial decisions shall be adopted by the Parties fully independently in accordance with their respective policies and procedures. Nothing in this Memorandum of Understanding shall oblige the Parties to finance any projects failing to meet their financial criteria or limit the Parties in considering financing, collectively or individually, any projects in the above-listed fields being developed beyond the Partnership.


Section 5

Final Provisions

Either Party may withdraw from this Memorandum of Understanding at any time by giving written notice thereof to the other Party not later than one month prior to the date of withdrawal.

This Memorandum shall neither infringe the status of the Parties nor create any legally binding obligations for the Parties.

Executed in Brussels on 23 February 2011 in 2 equally authentic copies in the English language.


For State Corporation Bank for Development and Foreign Economic Affairs (Vnesheconombank)

For the European Bank for Reconstruction and Development


Concerning the Memorandum of Understanding Between Vnesheconombank and EBRD for the Implementation of the EU-Russia Partnership for Modernisation Initiative

(For Reference)

Upon completion of the consultations of Vnesheconombank with the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and Nordic Investment Bank (NIB), the European Bank for Reconstruction and Development expressed interest in participating in the creation of a mechanism for financing the projects being implemented within the framework of the Partnership for Modernisation and executing the appropriate Memorandum of Understanding with Vnesheconombank. The Memorandum was executed on the sidelines of the meeting between the Government of the Russian Federation and the European Commission on 23 February 2011.

The Memorandum outlines, in general terms, the intentions of Vnesheconombank and EBRD to develop co-operation aimed at supporting the projects within the framework of the Partnership for Modernisation. Furthermore, the parties consider allocating for the above-mentioned purposes up to USD 500 million each.

The main efforts shall focus on projects in the following top-priority fields provided for by the Partnership:

  • - Energy efficiency: energy conservation and renewable energy sources, clean coal production and processing technologies, the use of associated gas and methane, carbon dioxide capture and storage, energy efficient district heating and activities aimed at increasing energy conservation in buildings, energy efficiency in energy production, transmission and distribution;
  • - Transport: assistance in transport integration within the framework of the Northern Dimension Partnership on Transport and Logistics and the Central Axis Partnership, co-operation on marine transport and the development of multimodal transportation and routes, the implementation of the Intelligent Transportation Systems and road safety improvement, the development of high-speed railway network between Russia and the EU;
  • - Small and medium-sized enterprises: support for innovation initiatives related to small and medium-sized enterprises, including business incubators, research parks, business technology centres; support for financial services to small and medium-sized enterprises (venture capital funds, lending, microlending, etc);
  • - Commercialisation of innovations in sectors such as pharmaceuticals, energy efficiency, environmental protection and transport.

Under the Memorandum Vnesheconombank and EBRD shall:

  • - consider potential projects in the above-listed fields initiated by the European and Russian companies for implementation in Russia within the framework of the Partnership and proposed to the parties by the Ministry of Economic Development of the Russian Federation or other authorities;
  • - exchange information and the results of legal and financial expert review in respect of such projects provided that they are kept confidential to identify co-financing opportunities;
  • - develop consistent approaches to project structuring and implementation.

For reference:

To date, VEB has received 4 requests for financing whose total value exceeds RUB 19 billion (more than USD 670 million).

ZAO Aerokompozit (project for the construction of composite materials production for the airline industry) request RUB 3.6 billion.

ZAO Polet Aviation Company (Air launch project for the injection of light-class spacecrafts into various orbits using Polet carrier rocket launched from AN-124-100 Ruslan heavy-lift transport aircraft) request more than RUB 10 billion.

OAO Klinstroydetal (project for the production of prefabricated reinforced concrete buildings on the platform of the state-of-the-art European method of PCPF (Precast Concrete Permanent Form) request RUB 3.7 billion.

OAO National Centre for Re-equipment of Defence Industry Enterprises (project for the development and production of Metal Ceramic X-ray Tubes (MCXRT) and specialised radio engineering parts) request RUB 2 billion.