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Russian bankers called upon to manage high-speed main lines
Russian Railways (RZhD) has not insisted on attracting private investment from international consortiums that have expressed an interest in taking part in the tender to build the high-speed railway from Moscow to Kazan. A Russian investor will contribute the remaining RUB 290 billion needed, and, in return, the investor will receive the final say over the project and the right to distribute construction subcontracts. Most likely, German Gref or one of his colleagues – Andrey Kostin, Vladimir Dmitriev or Andrey Akimov – will be granted the project.
RBK daily has learned that RZhD intends to attract a key investor to the project with whom it will create a special project venture (SPV) based on High-speed Main Line (a subsidiary of RZhD created under the HSM project). High-speed Main Line has confirmed this information, stating that RZhD will “take part in a new company as the minority shareholder”. The total amount of the SPV’s registered capital will be up to 6% of the total cost of the project, which is currently estimated to be RUB 928 billion.
The investor will contribute money and property, for which it will receive the right to oversee the construction by distributing construction subcontracts, purchasing rolling stock or signing agreements with transporters on delivering the infrastructure. In addition, the investor will attract credit or long-term financing, thereby contributing around 30% of the project total, or RUB 290 billion. RBC has learned that the investor will be a Russian company rather than an international investment consortium, given that it would be difficult for RZhD to attract such a large amount in a rather short period. As previously announced, VEB Bank, VTB Bank, Gazprombank and Sberbank are still the main contenders to complete the project.
VTB Bank has stated that it has considerable experience in completing infrastructure projects under PPP. “We have been working with a key player on Russia’s infrastructure market for a number of years and our long-time partner, RZhD. As a bank, we are able to attract private money under a PPP for rather complicated infrastructure projects, including from foreign investors, and we are ready to participate in PPP in the future”, states a Bank official. VEB Bank has stated the same, noting that it has a close working relationship with RZhD, which includes completing projects under PPP. Sberbank and Gazprombank have not responded to RBD daily. State banks could also face competition from private business. RBC daily has spoken with someone that participates directly in developing projects, and this person has said that parties close to President Vladimir Putin could invest in the HSM project.
Irrespective of the investor, this party will be required to exit the railway business in ten years. RZhD is expected to have to pay 4% of the cost of constructing the HSM in order to buy out the shares; and there are several nuances in the RZhD financing plan that require further work, particularly in terms of the relationship with the investor.
If the state adopts the PPP law, an investor’s expenses could be compensated by SPV shares from the investors to the public partner, which practically removes the risk of default of the RZhD shares, says Anastasia Grishina, a lawyer at ART DE LEX. Otherwise, the HSM project will most likely be completed under concession conditions; meaning that the private investor’s financial expenditures will be compensated by funds from the service users, states the lawyer.
The state will subsidise the HSM at the operating stage (RUB 179 billion is envisaged) to ensure that the funds are recovered. High-speed Main Line has stated that the subsidies will be delivered by 2024.
RBK daily has learned that RZhD intends to attract a key investor to the project with whom it will create a special project venture (SPV) based on High-speed Main Line (a subsidiary of RZhD created under the HSM project). High-speed Main Line has confirmed this information, stating that RZhD will “take part in a new company as the minority shareholder”. The total amount of the SPV’s registered capital will be up to 6% of the total cost of the project, which is currently estimated to be RUB 928 billion.
The investor will contribute money and property, for which it will receive the right to oversee the construction by distributing construction subcontracts, purchasing rolling stock or signing agreements with transporters on delivering the infrastructure. In addition, the investor will attract credit or long-term financing, thereby contributing around 30% of the project total, or RUB 290 billion. RBC has learned that the investor will be a Russian company rather than an international investment consortium, given that it would be difficult for RZhD to attract such a large amount in a rather short period. As previously announced, VEB Bank, VTB Bank, Gazprombank and Sberbank are still the main contenders to complete the project.
VTB Bank has stated that it has considerable experience in completing infrastructure projects under PPP. “We have been working with a key player on Russia’s infrastructure market for a number of years and our long-time partner, RZhD. As a bank, we are able to attract private money under a PPP for rather complicated infrastructure projects, including from foreign investors, and we are ready to participate in PPP in the future”, states a Bank official. VEB Bank has stated the same, noting that it has a close working relationship with RZhD, which includes completing projects under PPP. Sberbank and Gazprombank have not responded to RBD daily. State banks could also face competition from private business. RBC daily has spoken with someone that participates directly in developing projects, and this person has said that parties close to President Vladimir Putin could invest in the HSM project.
Irrespective of the investor, this party will be required to exit the railway business in ten years. RZhD is expected to have to pay 4% of the cost of constructing the HSM in order to buy out the shares; and there are several nuances in the RZhD financing plan that require further work, particularly in terms of the relationship with the investor.
If the state adopts the PPP law, an investor’s expenses could be compensated by SPV shares from the investors to the public partner, which practically removes the risk of default of the RZhD shares, says Anastasia Grishina, a lawyer at ART DE LEX. Otherwise, the HSM project will most likely be completed under concession conditions; meaning that the private investor’s financial expenditures will be compensated by funds from the service users, states the lawyer.
The state will subsidise the HSM at the operating stage (RUB 179 billion is envisaged) to ensure that the funds are recovered. High-speed Main Line has stated that the subsidies will be delivered by 2024.