Russia Infrastructure Report Q1 2011

The Russia Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Russia's infrastructure industry.

Regulatory and political risks in Russia make the PPP ventures highly precarious and the negative impact has been felt this quarter on the Moscow- St. Petersburg motorway PPP, following the suspension of the project on environmental concerns. We see greater growth potential for infrastructure that will support the commodities export sector, especially ports and pipelines. For Q110, BMI has introduced extended forecasts to 2020 and a new section covering the Residential, Non-Residential Construction and Social Infrastructure sectors in each of its markets.

Four themes dominated developments in Russia’s infrastructure over the previous quarter (Q410):

- The suspension of construction of the Moscow- St.Petersburg motorway highlights the risk that the opaque administrative and legal system in Russia poses to infrastructure projects. The weak rule of law, institutional inefficiencies and the high levels of corruption brewing within Russia's heavy bureaucratic edifice are the main threats identified by BMI as risks, which in this case, have jeopardised one of the largest infrastructure projects in Russia;

- The Northern Sea Route (NSR) commercialisation presents upside to the port construction sector; and,

- Infrastructure associated with the export of commodities (pipelines, ports and transport infrastructure to support oil and gas output in East Siberia) are the sectors that present the highest growth potential as their development predicates growth in the natural resources sector, therefore have been prioritised by the government.

The suspension of construction of the Moscow- St. Petersburg toll road raises several questions regarding the future of the project. BMI highlights some first implications from the decision to halt construction and notes that this turn of events underlines BMI's assessment of Russia's project finance environment as high risk.

Investment plans for ports in northern Russia are apparently gathering pace in light of the progress made on the Northern Sea Route, which allows the passage of liquid bulk as well as dry bulk cargo. Though volumes are going to be moderate compared to other shipping routes, the progress of the NSR is nonetheless prompting major investment plans for ports and auxiliary transport infrastructure. New data for real growth show that the overall construction industry decline was -17.5% in real terms, as opposed to previous data showing a decline of nearly 30%. In nominal terms, the industry value for 2009 was the same, reaching nearly RUB1.9trn, down from RUB2.2bn in 2008. This decline was precipitated by curtailed government spending and the contraction in residential and commercial construction. We have revised down our forecasts for Russia's construction industry value for 2010.

Activity remains depressed in the residential and non-residential construction sector, and the respite offered by major infrastructure projects (especially in the power sector, oil and gas pipelines and ports) will not be sufficient by itself to drive overall construction sector growth. However, a recovery trend appears to be firmly in place and so we see upside to our forecasts.

Privatisation is also a theme for 2011, not really having materialised in 2010 as the government seeks to finance the budget deficit (forecast to be US$73bn in 2010, or 6% of GDP) by offloading of assets. Transport and energy assets have been earmarked among the 5,500 state-owned companies in which the state plans to divest stakes.

Executive Summary

SWOT Analysis
- Russia Infrastructure SWOT
- Russia Infrastructure Project Finance SWOT
- Russia Economic SWOT
- Russia Political SWOT

Market Overview
- Russia

Industry Forecast Scenario
- Table: Russia Construction And Infrastructure Industry Data
- Table: Russia Construction And Infrastructure Industry Data
- Construction And Infrastructure Forecast Scenario

Transport Infrastructure
- Table: Russia Transport Infrastructure Industry Data
- Table: Russia Transport Infrastructure Industry Data
- Transport Infrastructure Forecast Scenario
- Transport Infrastructure Overview
- Major Projects – New And Ongoing Projects
- Airports
- Ports
- Roads
- Railways
- Major Projects Table – Transport
- Table: Major Infrastructure Projects – Transport

Energy And Utilities Infrastructure
- Table: Russia Energy And Utilities Infrastructure Industry Data
- Table: Russia Energy And Utilities Infrastructure Industry Data
- Energy And Utilities Infrastructure Forecast Scenario
- Energy And Utilities Infrastructure Overview
- Oil And Gas Pipelines
- Major Projects – New And Ongoing Projects
- Power Plants
- Oil And Gas Pipelines
- Water
- Major Projects Table – Energy And Utilities
- Table: Major Infrastructure Projects – Energy And Utilities

Residential/Non- Residential Construction and Social Infrastructure
- Table: Russia Residential And Non-residential Building Industry Data
- Table: Russia Residential And Non-residential Building Industry Data
- Residential/Non-Residential Construction Forecast Scenario
- Residential/Non-Residential Construction And Social Infrastructure Overview
- Major Projects – New And Ongoing Projects
- Social Infrastructure
- Housing
- Construction
- Commercial
- Residential
- Major Projects Table – Residential/Non- Residential Construction And Social Infrastructure
- Table: Major Infrastructure Projects – Construction
- Special Events
- Sochi 2014 Winter Olympics
- Table: Planned Olympic Sports Venues

Business Environment
- Russia Business Environment
- Rewards
- Risks

Regional Overview
- Eastern Europe Infrastructure Business Environment Ratings
- Table: CEE Infrastructure Business Environment Ratings
- Project Finance Ratings
- Russia Project Finance Ratings
- Design And Construction
- Commissioning And Operating
- Overall Project Finance Rating
- Regional Overview
- Eastern Europe Infrastructure Project Finance Ratings
- Table: Design And Construction Rating
- Table: Commissioning And Operating Rating
- Table: Overall Project Finance Rating

Macroeconomic Outlook
- Table: Russia – Economic Activity

Political Outlook

Company Monitor
- Mostootryad No.19
- Russian Railways (RZD)
- Global Overview
- Table: BMI's Core Views For Global Infrastructure

Methodology
- New Infrastructure Data Sub-sectors: Methodology
- Infrastructure Forecasts: Methodology
- Sources
- Industry Forecasts
- Construction Industry
- Data Methodology
- Construction
- Capital Investment
- Construction Sector Employment
- Infrastructure Business Environment Rating
- Table: Infrastructure Business Environment Indicators
- Project Finance Ratings
- Table: Design And Construction Phase
- Table: Commissioning And Operating Phase – Commercial Construction
- Table: Commissioning And Operating Phase – Energy And Utilities
- Table: Commissioning And Operating Phase – Transport
- Sources

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