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Russia Infrastructure Report Q1 2012
Business Monitor International, Nov 2011, Pages: 102
Business Monitor International's 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.
BMI View: The completion of the tender for the first phase of the Western High Speed Diameter is certainly the major development in Russia’s transport sector for 2011. An international consortium was awarded the project, but as we expected, with a strong presence of state-owned banks, which we believe will be instrumental in arranging the financing for this project. In the wider infrastructure sector, capital outflow is continuing but is going largely unnoticed by markets. This poses a risk for the infrastructure sector, which relies on foreign investor confidence to import in expertise for the large scale PPPs the country wants to implement.
The themes that dominate developments in Russia’s infrastructure sector are:
- The Russian government's decision to create a US$10bn investment fund highlights the state's commitment to sharing the risks inherent in investment in Russia with the private sector – in an effort to attract a greater level of private capital. The government aims to use this investment fund as seed money to mobilise between US$50bn and US$90bn over the next five years, by financing up to 20% of the cost of privately-procured development projects.
- The 2018 World Cup win has prompted a change in our long term-forecasts, with growth accelerating, especially in the non-residential and residential construction sector. However, we see risks to the implementation of projects and foresee problems related to project cost overruns.
- Furthermore, infrastructure associated with the export of commodities (pipelines, ports and transport infrastructure – to support oil and gas output in East Siberia) has the highest growth potential – as development is predicated on growth in the natural resources sector. These projects have been prioritised by the government.
Privatisation is also a theme for 2011 – despite the fact it did not really materialise in 2010 – as the government seeks to finance the budget deficit (forecast to be US$73bn in 2010, or 6% of GDP) by offloading assets. Transport and energy assets have been earmarked among the 5,500 state-owned companies in which the state plans to divest stakes. In this respect, EDF's subsidiary ERDF has come to an agreement with Russia's state-owned distribution company MRSK Holding to receive management rights for the Tomsk Distribution Company, one of the eleven regional distribution subsidiaries operating in Russia.
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