What forms of PPP are the most attractive for the Chinese constructing roads in Russia?
The recent First Russian-Chinese forum has defined the highlights of the two countries' relationship development. They include road and port development both in the Far East regions and in Central Russia.
Cooperation tools may be different
The Chair of Board of “Avtodor” GC, Sergei Kelbakh, remarked that he met a lot of his old friends from China, including partners he has been actively consulting with on specific road construction projects since last autumn.
The Russian road construction complex offers investors a number of new forms of cooperation. Sergei Kelbakh spoke about them in detail at the forum. What are they?
Firstly, there is a public-private partnership scheme, including direct toll concession agreements. A constructor, having built a road, charges a toll for using the road.
There is an incomplete concession, when the state pays for the constructor’s expenses on the road’s operation according to already-provided contractual duties.
And there is a long-term investment agreement, whereby the investment volume is restricted, and the road is not fully given to the constructor, but all other functions as to the pay-back of the investments are engaged in the contract.
Chinese investors may be interested in the opportunities offered by the Russian party.
Western partners have not rejected cooperation with Russia
— On our part, we are ready to closely cooperate with our Chinese partners, said Sergei Kelbakh at the forum. — “Avtodor” GC has more than 20 large-scale infrastructure projects in its portfolio. A part of them is almost complete, while others are to be implemented. Within the program 4,000 km of A-class automobile roads with maximum speeds up to 130 km per hour are to be constructed, including 1,788 km of toll roads.
Currently the company operates 500 km of toll roads. These are sections on М-11, М-1 and М-4 highways, along the North-South corridor, from the Baltic Sea to the Black Sea. It is the busiest stretch of road, so the creation of toll sections there is economically viable.
Many projects are being implemented with western partners’ participation. It should be remarked upon that, in these crisis conditions, European countries have not left all the projects and continue their cooperation with Russian specialists.
All key projects assuming long-term cooperation are implemented within PPP with private investments.
Operators will manage and charge for the road
A new form used by the Russian road-transport complex is the owner-operator agreement. That is when a built highway section is placed in the investor’s or operator’s hands for management, and the latter invests also in road maintenance. The toll is charged also by the operator.
— Currently there is a section of the М-4B highway operated by a joint Russian-French enterprise, Sergei Kelbakh said.
— One more innovation is an investment disclosure at the concept design stage, when a future investor, together with an interested financial institution, is developing a project, and then prepares a concession agreement and takes part in the project implementation. It is quite an unusual thing for Russia, the Head of “Avtodor” GC said.
The largest investment projects that are being implemented by the road-transport complex at present are the Central Ring Road round Moscow, which is to unburden the capital of intensive freight. By the way, concession tenders on the CRR are currently taking place.
Another project is the М-11 high-speed highway (Moscow – Saint-Petersburg). All its sections are being worked on now, and some have been put in operation: for example, the section round Vyshny Volochek from the 258th to the 334th km. In spring a tender will be announced for the section from the 58th to the 149th km. Long-term investments are being used in the construction of the road: 90% is invested by the state, and 10% by private investors.
Another project is the transportation corridor from Moscow to Kazan. Preparatory work near Noginsk and Balashikha has been started. The “Avtodor” GC and the “RZhD” GC (also taking part in the project) synergy is sure to give the project a new vibrancy.
And of course one can’t but mention one more large-scale project — the Europe to Western China transport corridor, where work has already begun.
Photo by Sofia ORLOVA