Projects in Russia

Project Summary Documents

Project Summary Documents (PSDs) are disclosed for each project prior to Board consideration. They contain project descriptions, financial details, client information, environmental issues, tender guidelines, and contact details. PSDs for private sector projects are disclosed at least 30 days prior to Board consideration and for state sector projects, at least 60 days.

Project Summary Documents 

Signed projects

Board approval is the final stage in the project approval process. After Board approval, the EBRD and the client sign the deal and it becomes legally binding. Signed project lists reflect year-end data.

Signed projects  (0.1Mb) 

Sakhalin project

For easy access, all information related to the Sakhalin project is available from a dedicated portal page.

Sakhalin project page

Case studies

Bringing modern practices to an olde-worlde venture in St Petersburg

The tea they sell at “Untsiya” on Nevsky Prospekt comes in very old-fashioned looking packets – brown-flecked paper packets, with a square stamped on the front. When you buy your tea, it is weighed out from big glass jars with brass weights, and the name of the particular variety of tea you have chosen is handwritten with a quill pen, in elegant Russian copperplate, on to your packet.

These olde-worlde teashops (there are 11 of them around St Petersburg) fit easily into Russia’s old imperial capital, now once again looking elegant and sophisticated with its central streets brightly repainted since its 300th anniversary in 2003. But the stores are entirely modern.

As deputy director-general Olga Aksyanova explains, their founder, Sergei Nikolayev, opened the first shop in 2002. His company, Klassika, has gone on growing ever since. Two hundred other cafés and restaurants in St Petersburg serve the tea and it can be bought in 40 other Russian cities.

Klassika now employs 70 people and turned over €1 million in 2004. “Now we’re working on good marketing ideas,” says Olga Aksyanova, to allow the business to expand even further.

This is where the EBRD comes in to Klassika’s success story. In January 2005 the Bank’s Business Advisory Service (BAS), which is in its fifth year in St Petersburg, was so impressed by Klassika’s excellent shop design and the quality of its original business idea that it developed a marketing plan for the company’s expansion. The plan was prepared by a local consultant, guided by BAS and partly funded by a €5,000 grant from the BAS Programme.

“It helped significantly,” Olga Aksyanova says. “It was all done so fast – maximum results for minimum documentation, which is good for growing companies like ours. As a result, we improved; we got a better idea of what we needed.”

The shop has brought in loyalty cards. Every fifth ounce of tea comes free. There is a monthly tea newspaper for clients, describing new lines and flavours, and the company has established an elite line of teas to draw in wealthy clients. With the help of BAS, the company has entered the next stage of its success story.

Revving up Russia’s car industry

There is no denying that some of Russia’s domestically produced family cars have seen better days. It is not an uncommon sight to see drivers at the side of the road peering despairingly under the bonnets of their beloved Soviet-era Ladas that have finally given up the ghost.

Once a status symbol with a decade’s waiting list, the original Fiat range of Ladas with their 1966-vintage design are now looking more like a collector’s item than a means of transportation.

So the opening of the new environmentally friendly Toyota plant outside St Petersburg, in which the EBRD is making an equity investment of up to €24 million, could hardly be more timely.

Currently, only 157 Russians in a thousand are car owners, well below the Polish average of 250. This may change when the first Toyota Camry sedan, rated the most reliable car in recent years, rolls off the assembly line in late 2007.

President Vladimir Putin has warmly welcomed Toyota Russia and its €156 million investment in St Petersburg, praising the creation of at least 500 new jobs and stressing the important contribution of the EBRD. “I would like to highlight the role of the EBRD, our long-term partner, which is taking a 20 per cent stake in this project,” said the President at the press launch last year.

Analysts believe that Toyota Russia (fully controlled by Toyota Motor Corporation, now the world’s second-largest car giant) has got its timing right, opening production in Russia at just the right moment to gain access to what will be a fast-developing car market, expected to be worth €29 billion a year by 2010. The initial annual run of 20,000 Camrys might well increase to 200,000 in the long term as the local plant may be expanded with further investments.

Recent changes in tariffs on imported parts mean that manufacturing on site will reduce the price dramatically from today’s cost of US$ 31,000, including the 25 per cent import tax. Yet, despite the big mark-up, Toyota sold 46,000 imported cars in Russia in 2004 via its Moscow-based sales company, nearly double the total of the previous year.

In the years to come, it is predicted that Russians will be looking for cars priced between US$ 10,000 and US$ 20,000 so the Camry, at around US$ 21,000, is well-placed to succeed at the top end of the market.

Obviously, Toyota will set a high standard of good engineering, management and manufacturing practice for the domestic market to emulate. “By showing other companies the real success of Toyota, we hope to create a favourable climate for increased investment in the Russian economy, which will lead to Russia’s economic growth, expansion of the automobile market and development of the auto industry in Russia,” said Tokuichi Uranishi, Toyota’s Executive Vice President.

The EBRD has already invested €364 million in the Russian auto sector. The Toyota project represents the Bank’s second investment in a “greenfield” car production plant in Russia over the past four years.

Take-off for Russian aircraft makers

Russia has a proud heritage in aerospace technology. During the soviet era, Russian companies were world leaders in the manufacture of both civil and military aircraft. But following the collapse of the Soviet Union, investment in this hi-tech sector fell sharply, leading to a dramatic decline in Russia’s ability to compete in the international aerospace market.

In the EBRD’s first venture in the aircraft manufacturing business, we are helping to revive this sector by providing Sirocco Aerospace Russia with a €36 million loan to finance construction of a new export-oriented version of the Tupolev cargo aircraft, which is currently undergoing European certification. The Rolls-Royce powered aircraft will be built at Aviastar’s advanced assembly facility in the Volga region, which employs some 7,000 people.

The company’s first export contract is to supply five aircraft to two airlines in China, the world’s fastest growing aviation market. The loan will also help to re-establish Russia as an effective, low-cost competitor in the aircraft markets in Africa, the Middle East and the Pacific Rim.

“The Tupolev is a proven aircraft, well-positioned to compete internationally. With EBRD support, we can move more quickly into these new markets,” said Dr Kamel, Chairman of Sirocco Aerospace.

The project is also expected to develop skill levels as Tupolev will benefit from the expertise of Western aircraft companies involved in the supply of parts and the certification process.

Protecting St Petersburg’s drinking water

By cleaning up its waste water, St Petersburg is in danger of contaminating the city’s water supply. This paradox exists because huge quantities of dried sludge are being deposited in a landfill site near the city where toxic substances can seep into the local water table.

With the landfill close to capacity, the city’s water company, Vodokanal, is now constructing a large incinerator to burn the sludge following an EBRD loan of €24 million. This is the most efficient and environmentally friendly form of disposal, cutting solid waste volumes by 95 per cent and safeguarding the city’s underground water reservoirs. Under the terms of the financing, Vodokanal will also secure the existing landfill site to reduce the risk of pollution.

Once the incinerator is up and running, the plant will be able to treat greater volumes of waste water, which will further cut the amount of effluent contamination in the Baltic Sea. The project would be the first in Russia to call upon the private sector to run the plant following completion.

The Bank has a strong relationship with Vodokanal following three previous successful financings. “The EBRD has helped us to change our approach to business. The positive impact of this change is even greater than the benefits of the investments alone,” said Felix Karmazinov, General Director of Vodokanal.

This transaction is the third project to be financed under the Northern Dimension Environmental Partnership. Besides the EBRD’s loan, the Nordic Investment Bank is lending €9 million while the NDEP is providing a €6 million grant. A €10 million grant has been contributed by Sweden, which has also provided €2.5 million to Vodokanal in institutional support. The United Kingdom has provided grants to finance the project’s environmental analysis.

Powering ahead with energy efficiency

Egypt’s world-famous Aswan Dam is just one of the big international clients seeking to benefit from Russia’s expertise in power generation. The dam’s generators are to be modernised by Russia’s biggest power generation equipment company, the Power Machines Group (PMG). To help PMG fulfil this prestigious contract and many others from countries as far afield as India, China, Vietnam and Brazil, the EBRD is providing a €28 million loan. Around 40 per cent of this amount will be used by PMG to offer attractive payment terms to other potential customers, helping it to make further inroads into this competitive market.

The balance of the loan will support PMG’s modernisation of its plants in St Petersburg and Moscow, introducing efficiency measures that will cut the Group’s energy requirements by around 30 per cent. The EBRD loan is the first long-term financing that the company has raised from a Western lender. As well as assisting in the restructuring of the company, the loan will help to improve corporate governance in line with the country’s new Corporate Code of Governance. This will set important benchmarks for other Russian companies to emulate. An energy efficiency audit of PMG was funded by the Greek government.

”The EBRD’s loan recognises the progress we have made so far but, more importantly, it will help us to build on this to become one of the leading international companies in power generation equipment,” said Evgeniy Yakovlev, PMG’s Chief Executive Officer.

Modernising the forestry sector

Industries dealing with forest products in Eastern Europe typically operate with outdated facilities and low environmental awareness. In a region with abundant wood resources there is a clear need for investment in modern technologies to develop more efficient use of raw materials. The EBRD’s €100 million multi-project facility with Stora Enso, the world’s largest paper and board manufacturer, supports a long-term investment programme across the region. The projects to be financed are mainly in the sawn softwood and corrugated board industries.

Stora Enso will introduce new production methods to these industries. The first proposed projects to be funded are the construction of new sawmills in Karelia (in the north west of Russia, near the Finnish border) and Novgorod and a packaging plant in the Volga region. The sawmills will be the first in Russia to operate modern sorting and sawing equipment with computerised production processes and quality control systems. The second proposed project is the establishment of a new plant to produce corrugated packaging for the food processing and beverage industries.

The project breaks new ground for the EBRD. It is our first long-term regional cooperation deal and the first time we have syndicated a multi-project facility. It is also our first direct investment in the Russian sawn-wood industry. The projects will create new jobs and bring new skills and technology to the region. Stora Enso is expected to set the highest industry standards for environment, health and safety, sustainable forest management and corporate governance. The project is also expected to increase competitiveness in the sawmill sector and associated industries, such as logging, paper and wood processing.

“Stora Enso is pleased to have the EBRD as a strong partner in its future expansion in Russia and eastern Europe,” said Stora Enso’s Chief Financial Officer Esko Mäkeläinen. The multi-project facility funds a series of related projects. Future projects will be carefully screened to ensure respect for the environment and a high impact on the transition process.

Better home appliances for Russian market

The home appliances market in Russia is growing rapidly to meet consumer demand for new and reliable products. To boost this market, the EBRD is helping to improve the quality of household appliances made in Russia by investing in Stinol, the country’s leading refrigerator plant. The company is part of the Merloni Group, Europe’s third-largest maker of home appliances (which includes Indesit and Ariston among its brands). The Bank's €13.6 million equity investment will be used to modernise the company’s production facilities.

Since 2000 Stinol has increased its production from 600,000 appliances per year to over 1.1 million. Stinol products account for around 30 per cent of the Russian market. The company is currently focusing on developing its range of refrigerators and improving their efficiency and environmental standards. Merloni would like to build on its success at Stinol and plans to expand into the production of washing machines.

Stinol’s restructuring will take a number of years. During this time Merloni will develop skills in the areas of production, quality control, corporate management, distribution, marketing and after-sales service. Merloni’s technical expertise and sound environmental reputation will bring additional benefits in the areas of energy efficiency, recycling, and health and safety.

The EBRD will be represented on Stinol’s board of directors and will support the company’s commitment to adopt best practices throughout its operations. The project is expected to promote greater competition and to support the transition process by setting new industry, environmental and governance benchmarks in Russia.

Manufacturing: GM-Avtovaz automotive factory in Togliatti

Over 1,200 new jobs were created through an EBRD-supported project to modernise Russian car manufacturing. The Bank provided financing of €153 million to a joint venture between General Motors Corporation (GM) and Avtovaz for the construction and operation of a factory in Togliatti. The new production site has capacity to manufacture and assemble over 75,000 Niva vehicles per year. These are being sold in Russia as a "Chevrolet Niva" and exported through the GM and VAZ international sales networks. The engine for the new Niva was designed to meet EU standards for vehicle emissions, and the factory to conform to the EU's environment and health and safety standards.

The project was one of the largest examples of foreign direct investment in Russia following the 1998 financial crisis. The factory combines the Western technologies and processes of GM, currently the world's top automotive manufacturer, with the Russian design and engineering skills of Avtovaz, the largest producer of vehicles in Russia. The potential of the project is increased by the fact that both partners are investing equally in the joint venture. The project will help to meet the huge modernisation needs of the Russian car manufacturing sector and will be of benefit to suppliers associated with the joint venture.