VINCI secures $1bn loan for Russian road

Russia’s largest bank, OAO Sberbank, has announced that it will lend VINCI about $1.1bn with a 20-year maturity to help the French infrastructure group build the Moscow-St. Petersburg highway, Russia’s second road PPP.

German Gref, chief executive of OAO Sberbank, Russia’s largest bank, told prime minister Vladimir Putin last Friday that the bank will lend about $1.1 billion to French infrastructure group VINCI for the construction of part of the Moscow-St. Petersburg highway, procured through a public-private partnership (PPP).

Russian roads: moving

This initial stretch of the highway will run over 43 kilometres and aims to alleviate congestion on the existing M10 link between Sheremetyevo International Airport, Moscow’s main airport, and the city centre.

“We see this as a symbolic project [and] plan to sign an agreement with the consortium on April 27,” Gref told Putin, according to government transcripts. The loan will have a tenor of 20 years and will be split into $993 million of senior debt and a $154 million VAT facility. Gref said the loan, to be co-financed by development bank Vnesheconombank, would cover the road’s capex and will make it a minority investor in the project company. The project’s total cost amounts to $2.1 billion.

“Besides,” Gref told Putin that “10 billion roubles [$342 million] will be invested in bonds with sovereign guarantees” to help raise money for the project. However, it is unclear from the transcripts if the bank will sell bonds to help fund its loan or if the bonds will add to the loan.

The remaining funding for the ruble-denominated project is expected to come from the federal budget. Similar to last Friday’s financial close for the Moscow-Minsk M1 PPP, there is a good chance that the project will close without any international bank participation.

A consortium led by VINCI and several local companies reached commercial close for the 30-year contract last July. Construction for the road is set to start this year and should last for 36 months. The PPP contract covers the first part of the Moscow-St. Petersburg highway. The government plans to complete the rest of the 626-kilometre, $20 billion highway by 2015.

The project could be one of Russia’s first road PPPs to reach financial close. As recently reported on, the $750 million Moscow-Minsk M1 PPP, also known as the Odintsovo Bypass, is also nearing financial close. A government-guaranteed bond issue of some $282 million was instrumental in securing the project’s close.