The Eurasian Development Bank (EDB), the recently established Russian-Kazakh policy lender, plans to launch energy projects in Russia and Central Asia and provide trade finance to local banks, its president has said.
“We have plans to add to regional integration through funding electricity and hydropower plants, and to grow bilateral and multilateral trade in the region,” EDB president Igor Finogenov told Emerging Markets in a telephone interview.
The EDB was set up in January 2006 by Russia and Kazakhstan to enhance regional co-operation with around $1.5 billion in capital, and has financed $431.5 million to date in mainly power and transport sectors.
Fitch has rated it BBB+, citing the credit standing of its shareholders and “the privileges conferred on it by its two founding member states”.
Tajikistan applied to join the bank earlier this year and is expected to become a shareholder in the next few months. Armenia, Belarus and Kyrgyzstan have also expressed interest in joining.
The bank’s biggest project to date is a $620 million modernization of the Ekibastuz GRES-2 coal-fired power plant in Kazakhstan, finalized at the end of last week.
The project, supported by the Russian electric power monopoly UES and the Kazakh government, will deliver to electricity grids in both Kazakhstan and Russia. The third unit of the plant will be completed in six years’ time, bringing total capacity to 1.5 thousand megawatts. The EBRD financed a related project, the upgrade of transmission networks, in 2005.
Finogenov said the bank was mulling further investments to offset the region’s dire electricity shortfall, with this project establishing a precedent.
“This proves our clear mission to boost integration and secure energy supplies in the region. In the future, we will increase participation with the private sector and state authorities to fund large electricity projects.”
Finogenov, former part-owner and founder of Nomos Bank, said the EDB expects its loan book to reach $4.5 billion by 2010 and $7 billion by 2012. He also said the bank was set to pour capital into local banks in Russia and Kazakhstan to provide trade finance and SME lending, with its first stake to be announced in the second half of the year.
He expects the EDB will provide $800 million in trade finance programs with local banks over the next two and three years.
Finogenov said the EDB is keen to play an important role in the development of the water and hydropower plants in Central Asia. The bank is looking to invest in the $500 million Sangtudin water power plant-1 and the Rogun water power plant in Tajikistan as well as the $2 billion Kambarata GES 1 and 2 hydropower plant in Kyrgyzstan.
Disagreements between Tajikistan and Kyrgyzstan over the joint use of water resources have slowed progress, Finogenov admitted. “This is politically sensitive since rivers are flowing through multinational borders from one country to another. Therefore, hydro-power is a complex situation so before you can start any project, the regulation of water supply is needed. This involves an important political process.”
To fund these ambitions, the bank will access the syndicated loan market for up to $300 million over the coming months, after a $300 million eurobond was postponed in late 2007.