Vadim Mikhailov, First Deputy Managing Director of Russian Railways, said that ‘infrastructure investments are attractive to investors mainly because they can bring stable and predictable profits over the long run. We are already seeing that investors are ready to invest in the construction of strategic infrastructure, including railway projects.’
According to Mikhailov, in 2018, almost USD 130 billion which investors allocated to infrastructure could not find suitable investment projects because the proposed targets did not provide for such financing schemes. “This demand from the investment community was pushing infrastructure companies to do everything in their power to ensure that there were indeed a sufficient number of well-developed projects.”
“Investors prefer to invest in projects in which they see growth prospects. That reduces long-term risks. For example, the construction of a cargo terminal in the centre of Europe will allow investors to participate in an international project that focuses on cooperation with Asia, which has many of the fastest growing economies in the world,” Mikhailov explained.
RZD had achieved a significant success in implementing infrastructure projects through public-private partnerships. In particular, the government of the Russian Federation signed a concession agreement with a special project company for the construction of the Northern Latitudinal Railway in September 2018. The company is also implementing projects for the development of railway approaches to the ports of the Far East and North-West Russia using project financing.
“This enabled us to attract private funding, provide greater transparency, develop close international cooperation and offer well-developed projects. We must actively promote PPPs if they benefit all parties,” said Vadim Mikhailov.
Another project that is expected to be implemented through PPP is the planned construction of the Moscow – Nizhny Novgorod – Kazan HSR. A total of USD 9.5 billion (RUB 621 billion) in financing will be required for the first section between Zheleznodorozhny – Gorokhovets, with almost USD 3 billion (RUB 200 billion) coming in the form of a capital grant, that is state support as envisaged in the Comprehensive Plan for the Moderniation and Expansion of Main Line Infrastructure 2019-2024. Another USD 3 billion (RUB 201 billion) is to be covered by Russian Railways.
For the USD 137 billion (RUB 9 trillion) railway investment programme, RZD expects that USD 61 billion (RUB 4 trillion) will come from private investors.