International Finance Faculty Financial Markets and Financial Engineering

International Finance Faculty Financial Markets and Financial Engineering Chair Peculiarities, problems and prospects of project financing development in Russia Made by Supervisor Georgy E. Mazin A. V. Napolnov IFF 4 -3 Moscow, 2016 Ph. D

Contents 1 2 3 4 Relevance, object and goal of the study Process of the study Discovered problems Prospects and recommendations

Relevance Russia aspires to Need for extensive PF globally is the most PF in Russia is weakly used by virtue of a range of institutional problems diversify the economy infrastructural investments expedient instrument Object GOALS PF institution in Russia o examine the global practice and investment projects o reveal existing problems implemented on its basis o find new fields of PF application over the last 20 years o devise a set of recommendations

Process of the study

Process of the study legislative the world the state Russian experience framework practice support market trends

problems

problems

Figure 10. Structure of Russian banking system’s liabilities and OE Non-stationarity of the 1 Russian economy with typical unexpected changes in indicators A substantial gap Figure 11. Structure of deposits’ maturity in Russian banks 2 between maturities of Russian banks’ assets and liabilities The requirement to make 3 provisions for possible losses according to the state budget of Russia and oil revenues’ share in it Fig. 9 Revenues of the Instruction No 254 -P Source: derived byby the author on the basis of the data from the Central Bank of Russia Source: derived the author on the basis of the data from the Central Bank of Russia

Low quality of projects 4 proposed to banks (adequate for funding under project financing) Insufficient own funds 5 and lack of professional support for “greenfield” projects initiators Difficulties with sales of 6 products (especially for the projects in the non-central regions)

Prospects

10 12 9 8 6 11 7 RECOMMENDATIONS

recommendations 1 2 3 4 5 6 To develop the official methodology on the principles, terminology and indicators of project effectiveness evaluation, which will serve as a unified basis for financial and economic analysis of investment projects

recommendations 1 2 3 4 5 6 To establish an industry-specific database on investment project implementation and PF transactions. This informational and analytical DB will allow banks to refer not only to their own practice, but to the market-wide statistics as well

recommendations 1 2 3 4 5 6 Banks should conduct credit scoring of project companies to assign credit ranks, since an A-level of the borrower by Russian agencies allows banks to reclassify him and use the lower multiplier when calculating the reserves.

recommendations 1 2 3 4 5 6 To introduce a term “homogeneous projects” in the regulatory framework of Program 1044, which will create a basis for financing of the state priority projects, which, if considered by one, do not reach the minimum threshold of 1 bln rub.

recommendations 1 2 3 4 5 6 To include a requirement for “ 1044” project to be launched within 3 months following the receipt of the state guarantee under Program 1044, with the termination of the project participation in the Program in the case of a breach of this requirement.

recommendations 1 2 3 4 5 6 To create a state-funded consulting center on the FCPF basis to support innovation project originators in business plan revision and conducting expert evaluations on a privileged basis.

Thank you for your attention! Peculiarities, problems and prospects of project financing development in Russia Made by Supervisor Georgy E. Mazin A. V. Napolnov IFF 4 -3 Ph. D