The proposed project aims to promote and develop a secure approach to agricultural commodity financing in Russia, Ukraine and Kazakhstan (the “Region”). The financing is structured as ownership-based commodity repo financing, under which Rabo purchases agricultural commodities from agribusiness companies in the Region (typically processing companies) and at the same time sells the commodities forward at a price, which includes financing costs and margin. Rabo Invest and the EBRD would share the risks of the ultimate clients.
The transition impact of the project is considered to be strong. Agricultural Commodity Financing Program with Rabo Invest, originally started in Russia, now has outgrown the boundaries of this one country and is to become a truly Regional Program. The participation of the Bank in the new financing has several benefits for this project and for the agribusiness sector in the Region in general:
(i) it enables the continued provision of working capital financing to local agribusiness companies, who otherwise could not receive financing in the absence of the properly functioning warehouse receipts (“WHR”) system in Russia and Ukraine;
(ii) it continues to prepare the ground for the WHR system in Russia and Ukraine while the institutional framework is being established, by setting up procedures for licensing of warehouses and asset-backed lending to local companies;
(iii) by adding credibility to Rabo Invest’s operations, it provides a demonstration effect for other lenders in the agricultural commodities market of the Region, which may lead to increase in financing provided by the local banks.
The EBRD's nominal client will be Rabo Invest (a 100 per cent-owned subsidiary of Rabobank International) or its subsidiaries. However, the main beneficiaries of the financing will be agribusiness SMEs in the Region, typically processing and/or trading companies.
Limited recourse loan, funded or unfunded to Rabo Invest to finance agribusiness companies in the Region. The EBRD’s maximum exposure in this project will be US$200 million. Rabo Invest and the EBRD share the risks of the ultimate clients in each of the sub-projects. The EBRD participation will have a maturity of up to 12 months. However, the EBRD loan can be rolled over on an annual basis for the next 3 years.
The total project amount is estimated at ca. US$780 million, subject to adjustment depending on the market needs in the relevant agricultural season.
The key environment, health and safety risks associated with this project are:
a) that the commodities purchased and stored by Rabo Invest may not be of sufficient quality or deteriorate during storage, therefore making them unsaleable
b) that the borrowers may not purchase the commodities. The latter could occur, because the borrowers are impacted by problems of an environmental nature, which restrict their ability to operate.
Therefore, Rabo Invest must ensure that warehouses utilised to store commodities meet the necessary standards to maintain quality, and that borrowers are required to comply with national standards for environment, health and safety. Rabo Invest will provide the Bank with annual confirmation that these requirements have been met.
Maarten Pronk, Chairman of the Executive Board
Tel: +7 095 721 1984
Fax: +7 095 721 1985
For business opportunities or procurement, contact the client company.
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Text of the PIP