MOSCOW, May 27. /ITAR-TASS/. Vnesheconombank (VEB) will use pension funds to buy 50 billion rubles worth of Russian Railways’ infrastructure bonds, reported Kommersant daily.

According to a source familiar with the negotiating process, VEB board meeting on May 15 referred the issue to the supervisory council, says the paper. The decision followed the First Deputy Prime Minister Igor Shuvalov’s instruction on April 10 to buy the bonds.

Most part of the proceeds, 26.8 billion rubles ($784 million), first planned to finance the Eastern Polygon program, including BAM and Transsib mainlines, will be allocated for engines, says the paper. RZD will purchase 1,529 new engines over 2014-2016 for 224.6 billion rubles ($6.6 billion) out of the entire investment program of 1.2 trillion rubles ($35 billion).

No funds are planned for modernization of the BAM and Transsib, said the source.

RZD chief executive Vladimir Yakunin proposed VEB to buy bonds in two tranches worth 25 billion rubles each, a 30-year tranche in June and a 25-year tranche in October.

The next meeting of the supervisory council will determine the main parameters of investing pension funds in the bonds of Russian issuers “whose rating is equal to sovereign rating or whose bonds are guaranteed by Russia”, said VEB. According to Shuvalov’s secretariat, the meeting is scheduled for June.

The bonds will be offered at the minimal yield to maturity, the paper says: growth rate of CPI over the last 12 months plus 1% per annum (for a floating coupon rate) or the yield on sovereign bonds (OFZ) maturing before the bonds in question plus 1% per annum (for fixed rate).