Developing its transport, public utility and social infrastructure is instrumental for Russia in addressing existing bottlenecks in terms of public services at the national, regional and urban levels that constrain its rates of modernisation, economic growth and improvements to the quality of life. The most efficient way to address these ambitious tasks, which is widely used worldwide, consists in joining the efforts of the government and business community via public private partnership projects. Promoting the PPP project market is our strategic goal. In achieving this goal, the Bank provides financial and non-financial support to projects delivered by public and municipal authorities involving private capital.
Key areas of Vnesheconombank’s operations in developing the PPP project market
Vnesheconombank’s operations in developing the PPP project market focuse on the following objectives:
investment consultancy on preparation of PPP investment projects for Russian constituent entities;
implementing the Programme for Financial Support to Regional and Urban Development Projects operated by the Federal Centre for Project Finance;
performing the functions of a financial advisor to the Russian Government on projects applying for government support from the Investment Fund of the Russian Federation;
developing the legal regulatory framework on PPP issues;
PPP-related education.
In its investment operations, Vnesheconombank favours projects based on public private partnership (PPP) mechanisms. By financing major PPP projects of nationwide consequence, we facilitate a faster infrastructure debottlenecking of the economic growth and more robust relations between the government and business community.
Renovation and Operation of Pulkovo International Airport (First Phase)
Project initiator: Northern Capital Gateway Ltd. (Saint Petersburg)
Total project value: EUR 1.2 bn
Vnesheconombank’s commitment: RUB 10.0 bn
The project is planned to create 585 new jobs
Expected tax receipts: RUB 20 bn
Pulkovo Airport won the National ROSINFRA Award as the best PPP infrastructure project in the transport industry in the Airport Infrastructure category.
The project seeks to set up an advanced airport terminal and develop the airport’s service infrastructure by building a new passenger terminal, renovating the existing Pulkovo-1 terminal, and upgrading the airfield and engineering infrastructure of Pulkovo Airport. The project is implemented under an agreement for creation, renovation and operation of facilities owned by Pulkovo Airport made between Northern Capital Gateway Ltd., Saint Petersburg Government and JSC Pulkovo Airport.
As of today, the project is a unique example of a public private partnership in Russia that is implemented without government investment.
On 4 December 2013, the new passenger Terminal-1 of Pulkovo Airport welcomed its first passengers.
Investment consultancy and monitoring
In 2013, in line with Resolution No. 1372-r by the Russian Government dated 17 August 2010, Vnesheconombank continued performing its functions as the sole investment consultancy service provider to constituent entities of the Russian Federation under government contracts for the procurement of PPP investment projects.
Under the contracts, we provide assistance to public and local authorities in implementing sectoral, regional or urban public infrastructure development strategies applying PPP solutions.
Investment consultancy services provided by Vnesheconombank result in investment projects meeting the requirements of the relevant constituent entity of the Russian Federation, financing organisations and potential investors, including legal, financial and economic, and engineering project documentation, an analysis of the market of potential project stakeholders, a package of documents for a bidding procedure to select the investor, and advice at the bidding procedure stage.
In 2013, Vnesheconombank completed working on government contracts for investment consultancy services to the Astrakhan, Irkutsk, Nizhniy Novgorod, and Yaroslavl Regions with respect to investment projects for social and transport infrastructure and public utility development. The total value of these projects was about RUB 50 bn.
Project: PPP-Based Construction of Childcare Centres in the Astrakhan Region
Initiator: Ministry of Economic Development of the Astrakhan Region
Preliminary project value: RUB 4.032 bn
The project will increase the capacity of pre-school educational institutions of the Astrakhan Region by more than 5 thousand places and will create over 600 new jobs.
As part of its investment consultancy services, Vnesheconombank prepared the project’s legal and financial models, drafted an investment memorandum and packages of contract and bidding documents. At this project stage, the parties have selected the private partner via a bidding procedure and signed an agreement on public private partnership.
Project: Development of Airport Infrastructure at the Existing International Airport of Irkutsk
Initiator: Ministry of Economic Development of the Irkutsk Region
Preliminary project value: RUB 1.92 bn
The project will facilitate the economic growth in the Irkutsk Region and support the infrastructure of the existing international airport of Irkutsk until a new advanced transport terminal is commissioned.
As part of its investment consultancy services, Vnesheconombank determined the conditions for project implementation on PPP terms, including via concession agreement mechanisms, prepared a financial and economic feasibility study for the transfer of shares in JSC International Airport Irkutsk and the property of the airfield of Irkutsk from the federal authorities to the Irkutsk Region.
Project: Construction of a Bridge over the Volga River in the Area of the Village of Podnovye (Nizhniy Novgorod Region)
Initiator: Government of the Nizhniy Novgorod Region
Preliminary project value: RUB 40 bn
The project will improve transport communications between Nizhniy Novgorod and Bor, considerably cut down transport and time costs for local residents, make traffic safer and contribute to the territory’s development.
As part of its investment consultancy services, Vnesheconombank drafted an investment memorandum, and bidding and contract project documentation. The Government of the Nizhniy Novgorod Region adopted a resolution on the need to set up a transport model for the project. The project is planned to be implemented in 2014.
Project: Inter-municipal Water Supply and Sanitation Project in the Yaroslavl Region
Initiator: Economic Development Department of the Yaroslavl Region
Preliminary project value: RUB 3.2 bn
The project will solve a key issue of the Region’s public utility sector: the worn-out state of public water supply and sanitation infrastructure that constrains the Region’s economic growth and adversely affects the quality of life of local residents and the environment.
As part of its investment consultancy services, Vnesheconombank prepared the terms of the inter-municipal projects, determined the terms and conditions for private investment, developed legal models for project implementation, ran an engineering survey in 15 municipalities, and made a high-level financial assessment of project performance indicators.
In 2013, Vnesheconombank signed a number of new government contracts for consultancy services to the Perm Territory, the Republic of Bashkortostan, and Omsk, Orenburg and Rostov Regions with respect to potential PPP investment projects. The Bank also signed an agreement for investment consultancy services to Institute for Development of Road Transport Complex LLC. The total value of these projects, most of which focus on the development of social and transport infrastructure, exceeds RUB 93 bn.
In 2014, we are planning to achieve the following key targets:
set up a mechanism for consolidation, accumulation and rollout of the intellectual capital generated by PPP projects;
ensure that income generated by Vnesheconombank under existing government contracts and investment consultancy agreements reaches at least 8% of their total cost;
ensure 100% performance of obligations by Vnesheconombank under existing government contracts and investment consultancy agreements;
ensure appropriate quality of services under 100% existing government contracts and investment consultancy agreements provided that the customer has no complaints.
In 2013, Vnesheconombank continued its involvement in the finalisation of the draft Federal Law “On the Principles of Public Private Partnership in the Russian Federation”. This draft law initiated back in 2012, has become a milestone event that offers new opportunities for private investment in public infrastructure projects. The document is intended to address Russia’s lack of legal instruments governing PPP projects at the federal level.
In 2013, the draft law was adopted by the State Duma in the first reading. The hearing of the draft law by the Council of the State Duma of the Federal Assembly of the Russian Federation was adjourned to a later date.
In parallel, Vnesheconombank reviewed the laws of constituent entities of the Russian Federation for availability of regulatory legal provisions that govern PPP projects. As part of this initiative, we prepared a number of comments, recommendations and opinions with respect to laws on involvement in PPP projects by 5 Russian regions: the Republic of Bashkortostan, Irkutsk, Moscow, Orenburg and Kostroma Regions.
Training the talent pool to promote PPP
The Public Private Partnership Chair of the Financial University under the Government of the Russian Federation continued its work in 2013. Set up by Vnesheconombank, the Chair offers its students training in skills required for PPP project development. The Chair also actively provides training and re-training services to employees of public and local authorities and representatives of business and other organisations involved in the implementation of public infrastructure projects.
Educational events held in 2013 as part of the PPP Chair's programe
In April and November 2013, the Chair held career enhancement courses of 72 academic hours, which were attended by 80 students from 42 Russian constituent entities. While implementing new training formats in Ufa, the Chair tested a short-term career enhancement programme of 18 academic hours, which was attended by 41 students.
In 2013, the Chair continued providing master degree training in Management under the Management of Public Private Partnership Projects programme. In September 2013, the Chair launched standard doctorate courses on Economics and National Economy Management. The Chair also offers career enhancement courses for faculty members and organises the methodological and research work on public private partnerships.
In 2013, Vnesheconombank continued to provide information and technical support to the Public Private Partnership in Russia web-site to promote the PPP concept among public and local authorities and the business community. The web-site was launched in 2010 to promote the PPP project market in Russia and has already proven itself as the leading expert platform for sharing experience in PPP projects. Over 50 thousand users visited the web-site in 2013.
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