Deals

VINCI sees light at the end of Orlovsky Tunnel

A subsidiary of the French infrastructure group will be officially awarded St. Petersburg’s $1.6bn Orlovsky Tunnel PPP next week. The project, which has been in procurement since 2007, will be two-thirds financed by the public sector with the private partner to contribute the remainder.

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Nevskaya Kontsesionnaya Kompania, a subsidiary of French infrastructure group VINCI, will be officially awarded the public-private partnership (PPP) contract to build St. Petersburg’s $1.6 billion Orlovsky Tunnel early next week, a government spokeswoman told InfrastructureInvestor.com.

The VINCI-led team ended up being the only team of the four originally pre-qualified to submit a bid for the project when the city resumed the tender process earlier this year.  The consortia should finish construction of the 2.2-kilometre long, 13-metre wide tunnel beneath the river Neva in 2015.

St. Petersburg had also pre-qualified consortia led by Strabag, Bouygues and Hochtief in late 2007 with the intention of awarding the contract by mid-2008. But the city and federal authorities said they did not have enough in their budgets to fund the project in the wake of the financial crisis, suspending the procurement process.

A government spokeswoman said that financing for the ruble-denominated project will be split three-ways between the federal and city budgets and the private partners. The city’s contribution will be in the form of availability payments – agreed-upon instalments paid by the city authorities to the consortia in exchange for making the asset available in good condition. That means the private partner will have to raise about $533 million for the project.

In related news, St. Petersburg is preparing to re-tender part of its Western High Speed Diameter (WHSD) project in 2011, now that the federal government has approved a guarantee that will allow it to cover up to $845 million in private-sector issued infrastructure bonds. This will allow the winner of the future tender process to presumably have an easier time in accessing the local bond market for the ruble-denominated project.

The WHSD project was originally tendered as a €5 billion PPP eventually awarded to a Strabag-led consortium in 2008. But Roland Jurecka, the head of Strabag’s concessions unit, explains in this month’s issue of Infrastructure Investor that his company was unable to reach financial close on the project after the crisis broke as “no international bank wanted to take the ruble risk on WHSD”. Its first two sections have since started construction from the federal and city budgets.