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Russia Infrastructure Report Q3 2012
Business Monitor International, June 2012, Pages: 76
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.
BMI View: Our previously held view that ‘political risk is the main element that can ultimately curtail growth as public policy remains opaque, convoluted and subject to frequent change’ continues to play out. Investor confidence remains weak in the aftermath of the presidential election in March 2012, and we continue to see perpetuate capital outflows. Nevertheless, the construction sector remains buttressed by flagship projects in relation to the 2014 Sochi winter Olympics and the 2018 FIFA World Cup, as well as a steady pipeline of projects within the extractive sector. Hence, we maintain our forecasts for construction industry value growth of 3% in 2012.
The themes that dominate Russia’s infrastructure sector are:
- The Russian government's decision to create a US$10bn investment fund follows a pledge it made to share the risks inherent in investing in Russia’s private sector. By doing this, it hopes to attract more private capital. The government will use this investment fund as seed money, spending US$50-90bn over the next few years to finance up to 20% of privately-procured development projects. However, we believe the risks to this commitment are weighted to the downside, due to persistent corruption and an opaque business environment. Hence, in the short to medium term, we believe project financing will remain a state-lenders affair.
- Consolidation in electricity seems likely to strengthen, with Gazprom proposing a merger with the privately held Renova power group. If this were to occur, it would increase Gazprom’s power generation capacity to nearly 90GW and further vertically integrate the gas company. The new company would control a quarter of the market.
- Infrastructure associated with the export of commodities (pipelines, ports and transport infrastructure – to support oil and gas output east and west of the Urals) has the highest growth potential – as development is predicated on growth in the natural resources sector. These projects have been prioritised by the government.
- The infrastructure projects surrounding the 2014 winter Olympics and the 2018 FIFA World Cup continue to buffer sector growth.
The privatisation wave within the domestic construction sector we were expecting in 2011 did not ultimately gain momentum (with the exception being the energy and utilities sector, which saw considerable foreign participation). However, we do not believe that it is completely out of the question in the longer term. BMI’s Russia country risk analysts note that a gradual reshaping of the Russian business environment will be underpinned by a weakening external climate, a decrease in oil-fuelled surplus and a need to maintain capital inflows. With this in mind, we see partial privatisation of big state-owned assets.
Transport and energy assets have been earmarked among the 5,500 state-owned companies in which the state plans to divest stakes. Political risk is obviously the biggest stumbling block to this venture. On the one hand, vested interest within the political caste may thwart efforts to open up state enterprises to private capital; however, we do not believe that investment sentiment will initially be conducive to privatisations.
BMI Industry View 5
SWOT Analysis 7
Russia Infrastructure SWOT 7
Market Overview 8
Competitive Landscape 8
Table: EQS Data 8
Building Materials 10
Table: Cement - Price/Volume % Variances (9m10/9m11) 16
Cement Forecasts 17
Table: Russia Cement Production and Consumption Data and Forecasts, 2009 - 2016 17
Table: Russia Cement Production and Consumption Long Term Forecasts, 2014 - 2021 18
Industry Forecast Scenario 19
Table: Russia Construction And Infrastructure Industry Data and Forecasts, 2008 - 2016 19
Table: Russia Construction And Infrastructure Industry Long Term Forecasts, 2013 - 2021 20
Construction and Infrastructure Forecast Scenario 22
Transport Infrastructure 26
Table: Russia Transport Infrastructure Industry Data, 2008 - 2016 26
Table: Russia Transport Infrastructure Industry Long Term Forecasts, 2013 - 2021 28
Transport Infrastructure Outlook and Overview 30
Major Projects Table – Transport 32
Table: Major Projects - Transport 32
Energy and Utilities Infrastructure 39
Table: Russia Energy and Utilities Infrastructure Industry Data 39
Table: Russia Energy and Utilities Infrastructure Industry Data 40
Energy and Utilities Infrastructure Outlook and Overview 41
Oil And Gas Pipelines 43
Major Projects Table – Energy and Utilities 44
Table: Major Projects – Energy And Utilities 44
Residential/Non-Residential Construction and Social Infrastructure 49
Table: Russia Residential and Non-residential Building Industry Data, 2008 - 2016 49
Table: Russia Residential and Non-residential Building Industry Long Term Forecasts, 2013 - 2021 49
Residential/Non-Residential Building Outlook and Overview 50
Table: Russia World Cup Preparations - FactBox 52
Major Projects Table – Residential, Non-Residential and Social Infrastructure 52
Table: Major Projects – Residential, Non-Residential and Social Infrastructure 52
Risk/Reward Ratings 54
Russia’s Risk/Reward Ratings 54
Regional Overview 55
Central and Eastern Europe Infrastructure Risk/Reward Ratings 55
Table: CEE Infrastructure Risk/Reward Ratings 59
Company Monitor 60
Mostootryad No 9 60
Global Overview 62
Industry Forecasts 69
Construction Industry 70
Data Methodology 70
New Infrastructure Data Sub-sectors 70
Capital Investment 73
Construction Sector Employment 73
Infrastructure Risk/Reward Ratings 74
Table: Infrastructure Business Environment Indicators 75