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Market Overview

Russian Transport Infrastructure Market: History of Development

The Russian transport infrastructure construction market historically has been underfinanced. As a result, the capacity and quality of the country's transport infrastructure remains poor, costing the Russian economy it is estimated over RUB1.3 billion or 3% of GDP annually, according to the Research and Design Institute for Regional Development and Transportation. 

78% of the public federal roads length complies with the relevant regulatory requirements for transport and operating parameters. The existing quality and availability of transport infrastructure are insufficient to support the country's economic growth. 

Acknowledging the situation, the Russian government made development of transport infrastructure its priority. Following a period of chronic under-financing in the 1990s, transport infrastructure is currently a booming sector of the Russian construction market. Road, bridge, railroad, airport, port and shoreline infrastructure construction and rehabilitation accounted for 12% of RUB7,545.9 billion in total construction investments in Russia in 2017 according to Rosstat. 

The Federal Target Program (FTP) «Russian Transportation System Modernization in 2002-2009» was successfully completed in 2009. Projects and ideas initiated as part of the program were endorsed in the new FTP for the period 2010-2020, adopted by the Russian government in 2008. Implementation of the new FTP as part of the Transportation Strategy of the Russian Federation is currently underway. 

Approved by Government Order 319 of 15 April 2014, the State Programme “Development of the Transport System for the Period 2013-2020” anticipates distinct financing for two separate federal target programmes: “Development of the Transport System of Russia (2010-2020)” and “Modernisation of the Unified Air Traffic Management System of the Russian Federation (2009-2020)”, as well as for sub-programmes “Mainline Rail Transport”, “Public Road System”, “Civil Aviation and Air Navigation Services”, “Maritime and Inland Waterway Transport”, “Transport Surveillance and Control”, “Highway Development within the Framework of Public-Private Partnerships” and others.

Russian Transport Infrastructure Construction Market, 2009-2017, RUB billion (excl. VAT)
200920102011201220132014201520162017
594.4591.8660.1654.7648.8623.8594.5737.1916.0

Source: PMR and EMBS Reports

Market Structure

Russian Transport Infrastructure Market Structure in 2017, RUB billion (net of VAT), %
Roads and bridges544.759%
Railways243.927%
Airports and airfields90.910%
Ports and other infrastructure36.64%
Total 916.0

Roads and Bridges

In 2017, 347.4 km (2016: 303.6 km) of newly built and upgraded federal roads were commissioned, including 230.7 km (2016: 214.0 km) by the Federal Road Agency and 116.7 km (2016: 89.6 km) by Avtodor.

Public-Private Partnership (PPP) Road Network Development 

Following major overhauls and repairs, in 2017 Avtodor put into operation, respectively, 46.3 km and 270.3 km of federal highways.

As at the end of 2017, a total of 16 toll segments with a total length of 815.7 km were put in operation, including 1 segment of the M-1 «Belarus» highway, 11 segments of the M-4 «Don» highway, 1 segment of the M-3 «Ukraine» highway and 3 segments of the M-11 «Moscow - St. Petersburg» highway. Avtodor put into operation highway segments with a total length of 116.7 km in 2017.

In absolute terms, total funding for road and bridge construction and maintenance, the key segment of the transport infrastructure market, was RUB544.7 billion, a 20% increase year-on-year. The growth was primarily driven by an increase in funding for the construction of the Kerch Bridge, Russia's largest project in the segment, as well as by the regional road network development and highway maintenance and repair.

Tenders

2017 saw 103 tenders (2016: 55) for a total of RUB539.6 billion1, an 8% year-on-year. 63% of the total volume of tenders went through the Federal Road Agency. The largest project was the contract for the construction and reconstruction of the Kerch-Feodosiya-Belogorsk-Simferopol-Bakhchisarai-Sevastopol highway (RUB149.3 billion), tendered off in the second half of the year. In 2017 Avtodor concluded 6 investment contracts for a total amount of more than RUB141.7 billion, including a RUB108.3 billion concession agreement on financing, construction and operation of the Central Ring Road in the Moscow Region (Start-Up Facility 4).

Considering that most of the tenders were small and the number of large tenders was extremely limited, the average tender size decreased significantly.

Average tender size , RUB million (incl. VAT)
20102011201220132014201520162017
2,7563,2443,5104,0055,7908,58529,1045,238

Source: The Official Russian Federation public procurement information website http://zakupki.gov.ru

Railroads

In 2017, a total of 248.7 km (2016: 441.6 km) of additional main tracks and new railway lines were put into operation as part of the following projects:

  • Modernization of the Baikal-Amur and Trans-Siberian railroads infrastructure, and development of throughput and carrying capacity (30.9 km)
  • Tobolsk-Surgut railroad segment development (7.9 km)
  • Comprehensive reconstruction of the M. Gorky - Kotelnikovo - Tikhoretskaya – Krymskaya segment, including the Krasnodar railway hub bypass (37.6 km)
  • Comprehensive reconstruction of the Taman Peninsula railroad network (30.1 km)
  • Comprehensive development of the Moscow transport hub railway infrastructure (4.7 km)
  • Construction of the Prokhorovka - Zhuravka - Chertkovo - Bataysk railroad (Stage 1: construction of the Zhuravka-Millerovo two-track electrified railroad (137.5 km).

In preparation for the World Cup 2018, work was carried out to develop subway lines in the cities of Nizhny Novgorod and St. Petersburg.

In 2017, total investment in railway infrastructure development increased by 56% year-on-year to RUB243.9 billion, including on the back of increased RZD spending on the above projects.

Airports

In 2017, 26 Russian airports were under construction and reconstruction. 6 runways were put into operation following reconstruction (2016: 2) at the airports of Rostov-on-Don (part of the new «Platov» Airport), Saransk, Yekaterinburg, Kyzyl, Krasnodar (Pashkovsky) and Chokurdakh.

2017 Results:

  • Infrastructure development completed in full at the airports of Gumrak (Volgograd), Koltsovo (Yekaterinburg), as well as key facilities (runways, taxiways, aprons) at Strigino (Nizhny Novgorod), Khrabrovo (Kaliningrad), Kurumoch (Samara ) and Saransk
  • Reconstruction launched at the airports of Yakutsk (Stage 3: Paved Runway 2), Tiksi, Srednekolymsk and Sakkyryr (Republic of Sakha (Yakutia)) and Norilsk (Stage 2: reconstruction of aprons)
  • Reconstruction of airfield infrastructure in Norilsk (Stage 1: Runway), Khabarovsk, Nizhnekamsk, Zeya, Kyzyl and Ulyanovsk.

New Rostov-on-Don «Platov» Airport construction project was completed ahead of the World Cup 2018.

In 2017, total investment in airport infrastructure development was RUB90.9 billion, a 40% increase year-on-year.

Seaports and Inland Waterway Infrastructure

In 2017, throughput capacity of Russian seaports increased by 22.0 million tons, mainly driven by works at the seaports of the Arctic and Baltic basins. Key projects included:

  • Modernization of light oil products shipment berths 3 and 4 in the seaport of Primorsk, resulting in a 11 million tons increase in the Primorsk Commercial Port LLC light oil products transshipment capacity
  • Commissioning of Sabetta seaport infrastructure with a design capacity of 6 million tons.

The following projects were implemented to enhance all-round safety of navigable waterworks and ensure navigation safety on inland waterways:

  • Reconstruction of the White Sea-Baltic Canal waterworks (Sluice 9)
  • Reconstruction of the North-Dvina sluice system (Sluice 5)
  • Completion of 7 river bars as part of the integrated project «Reconstruction of Regulation Structures of the Lena River Basin» 
  • Completion of regulation structures as part of the integrated project for reconstruction of the Yenisei River Basin waterworks and waterways.

In 2017, total investment in seaport and inland waterway infrastructure development continued to decline and amounted to RUB36.6 billion, a 40% decrease year-on-year.

2018 Industry Outlook

Federal Road Network Development  

In 2018, segments of federal highways with a total length of 854.3 km are expected to be put into operation following construction and reconstruction, a 2.5 times increase year-on-year, including 275.7 km (+19.5% year-on-year) of roads curated by the Federal Road Agency.

At the same time, strong focus is maintained on construction of the Kerch Bridge and its approaches from the Krasnodar Region (expected opening to traffic of the automobile part of the bridge), construction and reconstruction of segments of federal highways in the Far East, the North Caucasus, the Moscow and St. Petersburg transport hubs and other areas, recognized as priority projects in accordance with the established procedure.

Implementation of road network development programs is expected to increase the share of roads conforming to regulatory requirements in 2018 to 82.6% (2017: 77.8%).

PPP Road Network Development

In 2018, Avtodor is expected to put into operation 578.6 km (5x increase year-on-year) of highways, including completion of the M-11 Moscow - St. Petersburg highway (446.2 km) and commissioning of 125.9 km of the CRR in the Moscow region.

At the end of 2018, the length of toll highway network curated by Avtodor is expected to increase to 1,459.0 km. During 2018, incremental toll network expansion is expected to be 643.3 km, driven by commissioning of the following toll-based highway segments:

  • M-4 «Don»: km 1,119.5 - km 1,195 (75.5 km)
  • M-4 «Don»: km 1,195 - km 1,319 (124.0 km)
  • M-11 Moscow - St. Petersburg: km 334 - km 543 (Stage 6; 217.1 km)
  • M-11 Moscow - St. Petersburg: km 543 - km 646 (Stage 7; 103.4 km)
  • M-11 Moscow - St. Petersburg: km 646 - km 684 (Stage 8; 34.2 km)
  • M-11 Moscow - St. Petersburg: km 58 - km 97 (Stage 1; 38.1 km)
  • M-11 Moscow - St. Petersburg: km 97 - km 149 (Stage 2; 50.9 km).

Additional Main Tracks and New Railways Development

2017 priorities:

In 2018, 231.9 km of additional main tracks and new railroads are expected to be put into operation (2017: 248.7 km), including the following projects:

  • Development and upgrade of the railway infrastructure on the approaches to ports of the Azov Sea -Black Sea
  • Construction of the western bypass of the Volga railroad Saratov hub, including fortification of the Lipovsky-Kurdyum railroad segment 
  • Organization of high-speed passenger train traffic on the Oktyabrskaya railroad St. Petersburg-Buslovskaya segment
  • Construction of the Tommot-Yakutsk (Nizhny Bestyah) Start-Up Facility on the Berkakit-Tommot-Yakutsk railroad in the Republic of Sakha (Yakutia)
  • Development of the Moscow transport hub
  • Development and upgrade of railway infrastructure on the approaches to ports of the North-Western basin
  • Modernization of railway infrastructure of the Baikal-Amur and Trans-Siberian railroads, including development of throughput and carrying capacity
  • Completion of the Kerch Bridge construction.

In the framework of the program for the preparation for the World Cup in 2018, subway development projects are expected to be completed in the cities of Nizhny Novgorod and St. Petersburg.

Airport Network Development

2018 Key Priorities:

  • Completion of reconstruction of airports in the World Cup 2018 hosting cities
  • Reconstruction of airfield infrastructure at the Sheremetyevo and Domodedovo airports in Moscow, as well as in Kaliningrad, Nizhny Novgorod, Samara and Yekaterinburg
  • Reconstruction of airports in the Far Eastern Federal District, the Baikal Region and the Arctic Zone
  • Reconstruction of airfield infrastructure of the airports of Yakutsk, Khabarovsk, Magadan (Stage 2), Norilsk, Ulan-Ude, Srednekolymsk, Sakyryr, Tiksi, Ossora, Zeya, Bomnak, Ekimchan, Veliky Ustyug and Solovki.

10 airport runways are expected to be commissioned following reconstruction in 2018.

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1 Including VAT. Customers: Avtodor, Federal Road Agency, City of Moscow. RF official public procurement website http://zakupki.gov.ru. 

2 Including the Kerch Bridge construction contract