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30 january

Foreign investors may apply to be concessionaires for the Moscow-Kazan HSR Project

Alexander Misharin, First Vice President of OAO Russian Railways and General Director of JSC High-Speed Rail Lines (a subsidiary of OAO Russian Railways), reported that foreign investors will be able to apply to be concessionaires for the project to construct the Moscow-Kazan High-Speed Rail Line (HSR-2).

“We do not exclude, we invite,” Alexander Misharin replied to a question about whether foreign investors could participate in the project. He added that foreign business prefers to participate in such projects as part of consortia that include Russian companies. “It has always been so, and it will be true this time as well,” said Alexander Misharin.
Among the potential investors who are interested in the project, the First Vice-President of Russian Railways named a French consortium (Alstom and the Bouygues Construction) and a German one (Siemens and Strabag). He also noted the interest of Chinese companies, whose participation in the construction of the Moscow-Kazan HSR is currently discussed “at the highest level.” Alexander Misharin stressed that all consortia are actively working with Russian construction companies.

In addition, according to Misharin, the prospective investors “have their own agreements with our banks, including VTB, Sberbank and Gazprombank, which also sit on expert groups and are studying the model (HSR-2) in order to determine whether they will participate.”

At the same time, the government will remain the owner of the new infrastructure, “but the concessionaire will keep this property as a concession for a fixed period, which is 35 years according to the model.” According to Misharin, during this period, the concessionaire will be responsible for maintenance of the infrastructure in terms of its quality and speed performance characteristics.
The final list of JSC High-Speed Rail Lines concessionaires will be presented based on final meetings with investors, which will be held in February-March 2014. The contest to select concessionaires will be announced before the end of 2014.

The updated model of the Moscow-Kazan HSR-2 project was presented to the Ministry of Transport, Ministry of Finance and Ministry of Economic Development after having been reported earlier to JSC High-Speed Rail Lines. The HSR project consists of four sections: Moscow-Vladimir, Vladimir-Nizhny Novgorod, Nizhny Novgorod-Cheboksary, and Cheboksary-Kazan. Only the Moscow-Vladimir section will be built by OAO Russian Railways with the government support, which includes funds from the National Wealth Fund (NWF) and the Pension Fund of Russia (PFR). The cost of building the rail line along this section, according to the table of project capital investments (which RBC has in its possession) that was presented in the investment memorandum of the project, will be RUB 191.1 billion. The remaining three sites are planned to be built using concessions, whereby it is proposed that investors will be able to receive government grants for infrastructure construction, as a representative of JSC High-Speed Rail Lines clarified.

The total cost of construction of the three sections of the rail line is RUB 595.8 billion. (RUB 226.9 billion for Vladimir-Nizhny Novgorod, RUB 232 billion for Nizhny Novgorod-Cheboksary, and RUB 136.9 billion for Cheboksary-Kazan). OAO Russian Railways proposes to spend another RUB 160.8 billion for the construction and modernization of stations and depots (RUB 37 billion and RUB 25.4 billion respectively), as well as new rolling stock (RUB 50.1 billion) and communications (RUB 48.3 billion).

The construction costs of utilities (RUB 66.8 billion) and highways (RUB 53.8 billion) will be proportionately divided among all the executors specified in the table. JSC High-Speed Rail Lines confirmed that the total volume of needed investments will remain at the previous level of RUB 1 trillion 68.5 billion.

OAO Russian Railways plans to raise RUB 384 billion in investments for the construction of the pilot Moscow-Vladimir section. (RUB 150 billion for placing NWF funds in preferred shares of OAO Russian Railways with a 2% yield, RUB 139 billion for issuing PFR debt securities, RUB 31 billion for own funds of OAO Russian Railways, and another RUB 64 billion for contribution of federal funds to the shareholder capital of OAO Russian Railways). RUB 685 billion are required for the construction of the three remaining sections, RUB 317 billion of which come from government subsidies. Infrastructure bonds are planned to be issued for RUB 100 billion. Commercial loans will be used to raise RUB 225 billion, and investors will contribute an additional RUB 43 billion.

It is expected that an updated HSR-2 investment model will be presented to the Russian government in March 2014.

Source: http://www.rbc.ru/rbcfreenews/20140129201335.shtml

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