VTB/Gazprombank favoured for section of Russia’s largest PPP

The consortium, which also includes Italy’s Astaldi and Turkey’s Ictas Insaat, has been named preferred bidder to construct and operate the central section of the St Petersburg Western High-Speed Diameter toll road, the largest project launched within Russia’s PPP framework.

Northern Capital Highway (NCH) has been named preferred bidder in the tender for the right to construct – and subsequently operate – the central part of the Western High-Speed Diameter (WHSD), a tolled motorway around the Russian city of St Petersburg.

NCH comprises Russian banks VTB Capital and Gazprombank, Italian construction company Astaldi and Turkish construction company Ictas Insaat.

NCH’s bid proposes a minimum toll revenue guarantee by the city of St Petersburg of RUB9.67 billion (€225 million; $322 million) per annum. Should the actual revenue exceed this amount, NCH will pay 90 percent of the excess to the city. According to a press release issued by VTB Capital, “the level of the minimum revenue guarantee proposed by NCH was significantly lower than that proposed by its competitor, enabling significant budget savings [for the city]”.

According to the same press release, the central section is the most technically complex part of the WHSD to build, including three bridges and a tunnel. NCH’s total expected investment of RUB120 billion will comprise a combination of debt and equity plus a federal grant worth approximately RUB51 billion. The consortium has received a debt financing proposal from VTB Capital and Gazprombank and is expecting to sign a public-private partnership (PPP) agreement with the city of St Petersburg in December this year.

The WHSD is the largest project in Russia to have been launched within the framework of the country’s PPP mechanism. It is designed to further St Petersburg’s development as a major international transport hub and will be the first toll road to be operated within city limits in Russia. The motorway is scheduled to be completed in 2015.

In related news, VTB Capital has acted as arranger of a successful RUB10 billion issue of Western High-Speed Diameter 20-year RUB bonds. Proceeds of the bond issue, alongside financing from the city’s budget and federal subsidies, will be used to finalise the construction of the WHSD’s southern and northern sections.