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Mar 19, 2019

Russian Railways sees private investors willing to invest in railway construction



"Infrastructure investments are attractive to investors mainly because they can bring stable and predictable profits over the long run," says Vadim Mikhailov, First Deputy Managing Director of Russian Railways. Mikhailov was speaking during the strategic session of the International Railway Congress in Vienna on 18 March 2019.

"Financing the development of infrastructure from private funds should play an increasingly important role in the future. We are already seeing that investors are ready to invest in the construction of strategic infrastructure, including railway projects. Nevertheless, in 2018 almost $130 billion which investors allocated to infrastructure could not find suitable investment projects because the proposed targets simply did not provide for such financing schemes, said Mikhailov.

But according to Mikhailov, 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," said the Holding’s Deputy Managing Director.

Vadim Mikhailov told the participants of the strategic session that Russian Railways could point to several examples of successfully financing private infrastructure.

In particular, the Company’s international loan portfolio is about $5.9 billion, which includes eurobonds denominated in dollars, euros, Swiss francs, pounds sterling and roubles.

He stressed that Russian Railways was the only Russian infrastructure company that had managed to gain access to the British local bond market.

Mikhailov went on to say that the Company had achieved significant success in implementing infrastructure projects through public-private partnerships (PPPs). 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.

Russian Railways 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.




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