From Russia, with fresh momentum

With memories of the Pulkovo and Western High-Speed Diameter (WHSD) deals fading from the memory, is it time to raise questions over the sustainability of Russia’s public-private partnership (PPP) market?

Pulkovo, the St Petersburg airport which is the third-busiest in Russia, was the subject of a PPP which reached a $1.65 billion financial close in 2010; while the WHSD, a toll road, also in St Petersburg, posted financial close on $2.3 billion in 2012.

These deals were “trailblazers” says Peter Stonor, global head of transport and infrastructure at VTB Capital, the Moscow-based investment bank which was part of the winning consortia for both deals. Since then, he adds, there has been “some frustration in terms of the lumpiness of the [PPP] pipeline”.

However, Stonor believes there is now a “push to move forward” with at least three high-profile deals set to reach financial close sometime this year: the Moscow-St Petersburg M11 road project, the Lena River bridge PPP, and the implementation of an all-Russia tolling system for heavy trucks.

He also takes encouragement from the increasing interest being shown in Russia by international investors such as the Netherlands’ APM Terminals, which, through a portfolio company, acquired Moscow terminal operator NCC Group last year; Singapore’s Changi Airport, which in 2012 teamed with local partners to buy stakes in Russian airports; and Macquarie Infrastructure & Real Assets, which invests in the country through its Russia & CIS Infrastructure Fund.

Stonor also points to the deepening of the capital markets in Russia. “Russian Railways, for example, has tapped five different currencies [through bond issues] in the last 12 months,” he notes.