Re: Russia to launch massive toll road building program
- From: armourereric <armourereric@xxxxxxx>
- Date: Wed, 28 Nov 2007 20:12:44 -0800 (PST)
On Nov 28, 7:37�pm, "Michael G. Koerner" <mgk...@xxxxxxxxxx> wrote:
larry_scholn...@xxxxxxxxx wrote:
On Nov 28, 6:15 pm, "MaxConcrete" <o...@xxxxxxxxxxxxxxxxx> wrote:
From BusinessWeek...
The article first mentions Russia's oil wealth, but then goes on to say that
most of the roads will be tolled and privately funded. This could have an
impact in the United States. More demand for highway construction material
could keep material prices high worldwide, just like China has contributed
to inflation in recent years. If private tollroad building firms are focused
on Russia, they could be less interested in projects in the United States (a
good thing in my opinion). Maybe we can send Cintra to Russia.
http://www.businessweek.com/globalbiz/content/nov2007/gb20071121_7831...
Europe November 21, 2007, 9:34AM EST text size: TT
Paving 'a Road to Russia's Future'
Putin is finally working on infrastructure, inviting international companies
to bid on highway projects
by Jason Bush
Here's a number to ponder: 25,500. That's how many miles of expressways
China has built since 1988. The same statistic for Russia? A few hundred. As
the Chinese have carried out a building campaign unparalleled in history,
Russia-with its billions of dollars in oil wealth-has done little to improve
its infrastructure. Now, the Kremlin is embarking on an ambitious program to
bring its highways, railroads, and airports into the 21st century. "A modern
transport infrastructure is the real road to Russia's future," President
Vladimir V. Putin said on Nov. 13 while visiting a highway construction site
in the Siberian city of Krasnoyarsk.
Moscow isn't planning to skimp on public funding, but it's also looking to
bring in plenty of private money to pay for the upgrades. The state railways
and several ports and airports are planning public offerings to boost their
capital, and foreign and domestic companies are being invited to build and
operate highways in exchange for toll revenues. The plan is to construct
39,000 miles of new roads and 5,300 miles of railways by 2015. All told,
Russia is hoping to raise $1 trillion for infrastructure investment over the
next 10 years, with as much as 80% of the financing coming from private
sources.
INVESTMENT OPPORTUNITIES
The first of the privately financed road projects is likely to be something
called the Western High-Speed Diameter near St. Petersburg. Early next year,
the local government is slated to choose one of four international groups
vying for the right to build the 28-mile, eight-lane expressway that will
link the city with existing highways to Helsinki and Moscow by 2015. Bidders
on the $3 billion project include French highway operator Bouygues, San
Francisco-based engineering giant Bechtel, and Deutsche Bank (DB). The
winning consortium will operate the highway for 30 years, charging tolls
starting at about $1.60 per car.
That's just the beginning. Toll roads on the drawing board include stretches
of expressway from Moscow west to the Belarusian capital of Minsk, another
north to St. Petersburg, and a third to the south toward Krasnodar, en route
to the Black Sea resort of Sochi, the venue for the 2014 Winter Olympics. On
Nov. 20, Brisa, Portugal's leading toll-road operator, announced a joint
venture with Russia's Gazprom to bid for the Minsk and St. Petersburg roads.
Such projects are potentially attractive for investors, offering higher
returns than equity markets without the volatility, says Evgeny Trusov, head
of the project finance group at Ernst & Young in Moscow. "The investment
community is looking at this as an opportunity," he says. "It's a big
market."
Russian highways, though, are hardly a one-way bet. Russia passed a law on
concessions in 2005, paving the way for public-private toll highways, but
lawyers say conflicts over the law's interpretation are inevitable. Tolls
are also a novel concept for Russia, raising questions about how much
Russians would be willing to pay. The anticipated investment boom could send
construction costs spiraling, which would cut into returns. Russia's cement
prices, already the highest in Europe, have more than doubled this year
because of a real estate boom. And with so much money at stake,
opportunities for graft will abound.
Those risks aren't deterring Russian tycoons. Basic Element, a conglomerate
owned by metals magnate Oleg Deripaska, spent almost $2 billion this year on
stakes in Austrian and German construction companies to get a leg up in the
race to build infrastructure. So far, the company is evaluating projects
worth $35 billion, says L.J. Mahon, Basic Element's infrastructure chief.
"Over the next 5 to 10 years, there'll be as much opportunity here as
anywhere in the world," Mahon says. And SMP-Neftegaz, an oil company in
Tatarstan, decided to invest $77 million in an 89-mile expressway in the
region after four of its employees were killed in a crash on that dangerous
stretch of road two years ago. "Everyone says that China is a poor country,
but there are tens of thousands of kilometers of toll roads," says SMP
President Foat Komarov. "Why can't Russia do the same?"
Bush is BusinessWeek's Moscow bureau chief .
Imagine what the toll for a truck on the Trans-Siberian Tollway would
be, including the section under the Bering Strait into (and across)
Alaska!
Although I am certainly NOT one of Putin's biggest fans, I will say two
things: 1) 'What tookya so long?' and that 2) this is pretty good proof that
the Communist era (they were notoriously uninterested in things that made
commerce easier) is indeed truly over.
BTE, toll concessions are pretty much 'SOP' on the Eurasian megacontinent for
building major new highways, especially in France, Italy, Spain and in the
former Communist countries.
--
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I have a gut feeling that Putin aims to bring the infrastructure up to
modern standards then nationalize everything.
.
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