Alliance Oil Company secured support from state development bank Vneshekonombank for the $1.3 billion upgrade of a refinery after a blessing from Prime Minister Vladimir Putin and a visit by President Dmitry Medvedev, both companies said Friday.
VEB said its supervisory board, chaired by Putin, approved the bank’s participation in the upgrade of the Khabarovsk Refinery in the Far East by lending some of the $1 billion that remains to be invested before concluding the work in 2012.
VEB will also provide guarantees for any loans by Western banks, said Andrei Rumyantsev, a spokesman for Moscow-based Alliance Oil Company, whose depositary receipts trade on the Stockholm stock exchange.
Any future loans for Alliance — controlled by three government-friendly Chechen brothers, the Bazhayevs — will be insured by Spain’s credit insurance group CESCE, he said. “The involvement of the state agency and the Spaniards will allow us to get longer-term money on better terms,” he said.
VEB and CESCE signed a memorandum of understanding on the deal during Medvedev’s visit to Spain in March. Medvedev subsequently toured the Khabarovsk Refinery in May.
Putin, opening the VEB supervisory board meeting that decided to back Alliance, said the 70,000-barrel-per-day refinery was “the most important facility in the region.”
Spanish engineering contractor Tecnicas Reunidas is handling the $800 million contract to construct new hydrofining and hydrocracking facilities at the refinery, Rumyantsev said. Russian companies do the rest of the work, he said.
The refinery, which has comfortably little competition in the region, supplies jet fuel to the Khabarovsk airport, which the government designated as one of the strategic federal hubs, Rumyantsev said. Once upgraded, it will be able to sell Jet A-1 class fuel fit for Western-made aircraft, such as Boeings, he said.