Export Guarantee and Insurance Corporation (EGAP) has been officially informed that CSOB received a payment of USD37.8 million from the Russian company Kamchatgazprom as a repayment of the debt resulting from financing of the project of gas distribution in Kamchatka Region. The debt had arisen by non-payment of a credit extended by CSOB for the purposes of financing of the Czech part of the gas pipeline in Kamchatka delivered by the joint-stock company Plynostav Pardubice. The extended loan was insured and, in connection with this insurance loss, EGAP paid to CSOB an indemnification worth approximately CZK700 million. By payment of a sum of USD37.8 million, the insured receivable from the debtor, Russian state joint-stock company Kamchatgazprom (KGP), had been recovered in the full amount. Simultaneously, the only large insurance loss from insured export projects to Russia had been closed and further opportunities are opening not only for finishing the gas pipeline in Kamchatka but also for realization of similar products in other regions. The successful completion of the insurance loss related to financing of the gas conduit in Kamchatka is also important from the aspect of confirmation of enforceability of arbitration awards on the territory of Russian Federation.
Out of a total planned 400 kilometres of the gas pipeline in Kamchatka, about 50 per cent had been constructed by the joint-stock company Plynostav Pardubice. The second part had been built by a Russian supplier. Czech deliveries were financed by CSOB in the form of a credit extended to KGP and insured by EGAP against the risk of non-payment. Main source for securing repayments of the credit were future revenues from sale of fishing quotas which had been at disposal of the government of the Kamchatka Region.
From time aspect, the project had been broken into the section of construction and drawdown of the credit from November 2000 to November 2002 and into section of repayment which, according to the loan agreement, should have lasted from April 2003 to October 2007. In 2001, KGP fulfilled all its obligations without any troubles both from the business contract and from credit contract. During 2002, problems with payment of interest had occurred, and KGP stopped payments completely in 2003.
When investigating causes for the insurance loss, it came out that already in 2001 a prearranged principle of operation of the entire project had been significantly disrupted on Russian part, without any information of partners, by the Government Decree of the Russian Federation concentrating all revenues from sale of fishing quotas in Kamchatka Region. This measure degraded the prearranged scheme of security of return of funds invested into the project of construction of the pipeline. KGP only repaid first 2 instalments in the amount of about USD5 million, rest of the credit was dealt with by EGAP as an insurance loss and it started to pay out the indemnification to CSOB in 2004; even before, in cooperation with the bank, EGAP had started recovery procedures for this receivable. EGAP also cooperated with Russian state authorities when recovering it. The insurance loss had been repeatedly discussed at meetings of the Joint Czech–Russian Commission for Economic, Industrial and Science-Technical Cooperation, even on the top state administration level. For a long time, it had been impossible to arrive at concrete undertakings on Russian part or at fixing of the deadline for repayment of the debt. Therefore, legal action was taken against the debtor at the Arbitration Court attached to the Economic Chamber of the Czech Republic and Agriculture of the Czech Republic in January 2005; it issued a final and binding arbitration award fully in favour of CSOB and, as a matter of fact, in favour of EGAP. This award was subsequently recognized in full extent by the appropriate Kamchatkan court as well as by the Court of Appeal in Khabarovsk (March 4, 2008). In the meantime, on decision of Mr. Putin, the President of Russian Federation, solution of the debt issue was joined by the company Gazprom which provided KGP funds for payment of the debt.