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Jan 16, 2008

Russian Railways wins tender to manage Armenian Railways on concessionary basis.

Today in the Armenian capital Yerevan, Vladimir Yakunin, President of Russian Railways, took part in the official declaration of the results of a tender announced by the Armenian government in September 2007 to select a future concessionaire for Armenian Railways. Invitations to participate in the tender were extended to railway companies in 40 countries.   


Besides Russian Railways, India Railways also met the preliminary qualifications to participate in the tender. During the process of compiling the tender documentation, Indian Railways declined to participate in the competition and withdrew.   


“The transfer of Armenian Railways to concessional management under Russian Railways meets the strategic tasks of the Company. This will increase the scale of our transport business and strength our competitiveness on the international transport market. Russian Railways will bring to bear its extensive experience as a controlling company. The concession will also improve the image and status of Russian Railways,” said Vladimir Yakunin.


The concession is for 30 years, with a right to extend it for a further 20 years after the first 20 years.


The management of Armenian Railways will be entrusted to South Caucasus Railways, a wholly-owned subsidiary of Russian Railways set up in Armenia as a private company.  


According to the conditions of the concession, Russian Railways will make an initial payment of USD5 million to the Armenian government and annual payments to the Armenian budget will be 2% of revenues excluding passenger revenues.


The concessionaire will acquire the entire rolling stock of Armenian Railways. Under the preliminary investment plan, Russian Railways has also agreed to invest approximately USD400 million in the development of Armenia’s rail infrastructure during the 30 years it will manage Armenian Railways. In addition, it is planned to invest some USD170 million in renovating rolling stock, whereby Russian Railways will act as guarantor of the declared investments.  Practically all employees at Armenia Railways will be transferred to South Caucasus Railways.


Negotiations are currently underway with the Armenian government regarding the partial subsidising of losses from passenger operations.


Following final agreement, Russian Railways, South Caucasus Railways and the Armenian government, will sign the concession agreement for the management of Armenia’s railways in February 2008.


A detailed investment program will then be developed and a management system set up. The concessionaire is expected to begin operations from the second half of 2008.

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