Monthly News Bulletins

Russian Railways 2008. Results.

At an extended meeting of its Management Board on 23-24 December, Russian Railways reviewed its preliminary results for 2008. The company’s president, Vladimir Yakunin, noted that despite a decline in the 4th quarter caused by the international crisis, Russian Railways had achieved record freight transportation volumes. Preliminary statistics for 2008 are as follows:

• Freight turnover – 2.4 trillion tkm (up 5% on 2007);
• Transit freight – 27.1 million t (up 12.2%);
• Container shipments – 25.3 million t (up 7.2%);
• Passenger transportation – 1,295.5 million passengers (up 1.2%).

In 2008, the company and its subsidiaries purchased over 22,000 freight wagons, as well as 461 locomotives, 1,042 passenger carriages and 817 electric train carriages.

In 2008, Russian Railways invested a total of €9.93 billion in major projects such as infrastructure development on the Kuzbass – Northwest and Kuzbass – Far Eastern Transport Hub routes, oil deliveries to China (Phase 1), a new shuttle service between Moscow’s Savelovskaya station and Sheremetyevo airport, and a high-speed link between Moscow and St.Petersburg (to be completed in late 2009).

Investment during 2009 will be funded by €6.45 billion from Russian Railway’s own resources, with the Government willing to provide the balance as the company’s shareholder. Approval has already been given for placement of a €2.5 billion Russian Railways infrastructure bond and a €37 billion rights issue in favour of the Government during 2009. The company also plans to borrow from state banks.

Reform

2008 marked the 10th anniversary of reform in the railway sector. During the year, work began to sell off shareholdings in Russian Railways subsidiaries, with a private placement of 5% of Transcontainer OJSC. The plans for 2009-10 include the sale of non-controlling stakes in research companies, several plants within the Remputmash group, Refservice OJSC, Elteza OJSC and a number of other companies. Once the financial markets have stabilized, Transcontainer will hold an IPO. In total, Russian Railways plans to raise around €3.5 billion through flotation of its subsidiaries by the end of 2010.

In 2008, the Russian Railways holding company acquired an interest in the management organization developing the Murmansk Transport Hub and is also involved in the development of terminal facilities in Vladivostok port.

To promote the development of inter-modal passenger transportation approval was given for the purchase of a 50% shareholding in Aeroexpress OJSC - the operator of the rail links to Moscow’s airports.

And to develop the transport engineering industry Russian Railways, as the main client for railway equipment in Russia, acquired a blocking stake in Transmashholding CJSC - Russia’s biggest company in this sector.

International Projects in 2008

During 2008, Russian Railways worked on attracting business to the East-West Eurasian corridor, including the Trans-Siberian railway line. For this, a joint venture was created with German Railways, as well as a quadripartite venture involving the German, Polish and Belorussian railway systems.

At the beginning of the year, two experimental container trains traveled from China to Europe along the Beijing – Hamburg route as part of a joint project involving Russian, Chinese, Mongolian, Belorussian, Polish and German railways. The project demonstrated the great potential of the Trans-Siberian route and showed shippers the benefits of delivering freight overland rather than by sea: not only safe delivery, but also a reduction in delivery time from 35 to 15 days.

In 2008, Russian Railways won a tender for the rights to manage Armenian Railways under a 30-year concession, with the right to extend for a further 20 years. A subsidiary set up by Russian Railways to run the project under the name South Caucasus Railway CJSC began operations on 1 June.

The pilot stage of a project to revive the Trans-Korean line has been launched. This involves reconstructing the line between Hasan and Rajin (54 km) and building a container terminal in Rajin port.

Together with partners in Azerbaijan and Iran, Russian Railways is working on the creation of direct overland link along the western shore of the Caspian Sea, involving the construction of a new line from Kazvin via Resh to Astara inside Iran. This branch will become part of the international North-South transport corridor.

Studies have been completed on a project to lay a 1520 mm-gauge railway line from Moscow to Vienna. To attract transit freight to this line Russian Railways has begun developing a container route from ports in the northern Adriatic via Eastern Europe. As part of the project, Transcontainer (a subsidiary of Russian Railways) has taken a long-term lease on a transshipment terminal in eastern Slovakia.

In 2008, Russian Railways was also active on the international infrastructure project market. Agreements and contracts were signed on the supply of construction and engineering services, equipment and technology:

• Libya – construction of a 554 km section of the railway line from Sirt to Benghazi;
• Iran – electrification of a 46 km line between Tabris and Azar Shahr;
• Algeria – construction of facilities for a suburban railway system in Algiers (contract subject to approval from the Algerian Government).

Growing Demand for International Routes

In December 2008, Russian Railways reviewed the results of its new international routes from Moscow to Paris, Munich, Basel and Amsterdam. In one year, the direct-carriage services on these routes have been used by approximately 27,000 passengers:

• Moscow - Paris - over 1,500 passengers;
• Moscow – Munich - over 6,000 passengers;
• Moscow – Basel – over 7,000 passengers;
• Moscow – Amsterdam - over 12,000 passengers.

The comfortable Moscow – Paris carriage now departs Moscow as part of the Moscow – Berlin train, before being hooked up to German Railways’ night service from Berlin to Paris. Total journey time is 51 hours and 30 minutes, including a 12-hour daytime stopover in Berlin.

In future, the journey time to Berlin could be substantially reduced by using modern trains manufactured by the Spanish company Talgo. In October, Russian Railways and Talgo agreed to study the possibility of using Talgo Trenhotel Series 7 trains equipped with an automatic gauge-switching system on the Moscow – Berlin route. Specialists are now working on a joint feasibility study for the project. In parallel, three Spanish-made passenger carriages will be trialed at a testing facility in the town of Scherbinka. If successful, Russian Railways may purchase at least three Talgo trains for use on the Moscow – Berlin line.

In the meantime, Russian Railways is aiming to make traveling as comfortable an experience as possible. From December 19, a luxury-class carriage will run as part of Russian Railway’s No.9/10 “Polish” service between Moscow and Warsaw. The carriage comprises four twin-berth compartments and a bar. The compartments are equipped with air conditioning, toilets with underfloor heating and a shower cabinet. Each compartment has a bench that folds out into a queen-size bed, an additional overhead bunk, a wardrobe, a folding table and a small settee. There is also a DVD-VHS player and LCD TV.