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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.

Only 71% 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. 

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”, “Transport Support for the 2014 Olympics and the 27th World Summer Universiade in Kazan”. 

Russian Transport Infrastructure Construction Market, 2009-2016, RUB billion (excl. VAT)
20092010201120122013201420152016
594.4591.8660.1654.7648.8623.8594.5737.1

Source: PMR and EMBS Reports

Market Structure

Russian Transport Infrastructure Market Structure in 2016, RUB billion (net of VAT), %
Roads and bridges455.062%
Railways156.521%
Airports and airfields64.89%
Ports and other infrastructure60.88%
Total 737.1

 

2016 Transport Infrastructure Market Structure, RUB billion (net of VAT), %

Source: EMBS Group report

Roads and Bridges

In 2016, 303.6 km (2015: 422.8 km) of federal highways were put into operation following construction and reconstruction, including 214.0 km (2015: 369.1 km) by the Federal Road Agency and 89.6 km (2015: 53.7 km) by Avtodor.

Public-Private Partnership (PPP) Road Network Development 

In 2016, based on the principles and approaches to development of a high-speed road network in the Russian Federation, as approved by the RF Transport Ministry collegium, a draft Strategy for Development of the High-Speed Road Network in the Russian Federation was developed.

To date, Avtodor has signed 15 operational, long-term investment and concession agreements totaling more than RUB748 billion, which attracted more than RUB175 billion of private capital.

In 2016, a total of 78.1 km of federal highways were commissioned under PPP contracts.

In absolute terms, the total amount of financing for road and bridge construction, the key segment of the transport infrastructure industry, was RUB455.0 billion, a 4% increase year-on-year. Growth was mainly driven by increased financing for the Kerch Bridge, currently the country's largest construction project in the segment.

Tenders

In 2016, 55 tenders (2015: 45) totaling RUB500.7 billion1 were held, a 30% increase year-on-year. Avtodor, which held virtually no tenders in 2015, accounted for 60% of all tenders held in 2016. In 2016, Avtodor concluded 4 investment contracts totaling more than RUB227.4 billion, including:

  • Long-term investment contract for the construction, maintenance, repair and toll-based operation of segments of the 58 km –684 km section of the M-11 “Moscow – Saint Petersburg” Highway (Stage 1: 58 km –97 km; Stage 2: 97 km –149 km)
  • Long-term investment contract for the construction, maintenance, repair and toll-based operation of the 633 km –715 km segment (Losevo and Pavlovsk Bypass in the Voronezh region) of the M-4 «Don» Highway (Moscow – Voronezh – Rostov-on-Don – Krasnodar – Novorossiysk) 
  • Concession agreement for the financing, construction and operation of the Moscow Region Central Ring Road (Start-up Facility 3).
Average tender size , RUB million (incl. VAT)
2010201120122013201420152016
2,7563,2443,5104,0055,7908,58529,104

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

Railroads

In 2016, 45% of all Russian freight was transported by rail (86% excluding pipeline transport).

In 2016, 441.6 km (2015: 118.8 km) of additional main line tracks and new railways were put into operation, including under the following investment projects:

  • 22.3 km of additional main line tracks: «Comprehensive Reconstruction of the Gorky Segment – Kotelnikovo – Tikhoretskaya – Krymskaya, Bypassing the Krasnodar Railway Hub» 
  • 46.7 km of additional main line tracks: «Development of the Tobolsk – Surgut Segment»
  • 28.5 km of additional main line tracks: «Comprehensive Reconstruction of the Taman Peninsula Tracks»
  • 63.7 km of additional main line tracks: «Modernization of Railway Infrastructure of the Baikal-Amur and Trans-Siberian Railways, Including Development of Carriage and Traffic Capacity»
  • 226 km of new railways: «Construction of the Naryn – Lugokan Railway».

Following four years of significant underfinancing of the segment, investment in railway infrastructure in 2016 increased almost four-foldyear-on-year, to RUB156.5 billion (2015: RUB43.0 billion). Railway sector investment represented 21% of total financing for transport infrastructure development (2015: 7%).

Airports

Airport Network Development Key 2016 Priorities:

  • Development of airport infrastructure in cities hosting the 2018 World Cup, including reconstruction of airport infrastructure at Moscow airports (Sheremetyevo, Domodedovo), Kaliningrad, Volgograd, Saransk, Nizhny Novgorod, Samara and Yekaterinburg; construction of Runway 3 at the Sheremetyevo Airport and the new airport complex in Rostov-on-Don
  • Reconstruction of airports of the Far Eastern Federal District, the Baikal region and the Arctic zone; reconstruction in 2016 of airport infrastructure in Yakutsk, Khabarovsk, Norilsk, Ulan-Ude, Chokurdah, Nikolskoe, Oszora, Zeya, Ekimchan and Bomnak
  • Reconstruction and construction of facilities with a high level of technical readiness, including reconstruction of airport infrastructure in Voronezh, Petrozavodsk, Ufa, Nizhnekamsk, Kyzyl and Ulyanovsk, and construction of a new airport in Saratov.

In 2016, runways at the Ufa and Yelizovo (Petropavlovsk-Kamchatsky) airports were put into operation.

Having registered a decrease in financing in the previous year, the airport construction and reconstruction segment in 2016 received 9% (2015: 6%) of total industry financing. Investment in the segment was RUB64.8 billion, a 77% increase year-on-year.

Seaports and Inland Waterway Infrastructure

2016 saw implementation of a series of investment projects resulting in a 32 million tonne capacity increase at Russian seaports. Key projects included:

  • Commissioning of Stage 2 of the Bronka Marine Multipurpose Transshipment Complex
  • Completion of construction of a passenger ship terminal in Murmansk
  • Continued construction of seaport facilities near the settlement of Sabetta on the Yamal peninsula.

The following projects were implemented to enhance overall safety of inland navigable waterway infrastructure:

  • Reconstruction of infrastructure of the White Sea – Baltic Sea Canal
  • Reconstruction of infrastructure of the North-Dvina sluice system
  • Completion of Stage 2 reconstruction of the Azov-Don basin.

Investment in seaport and inland waterway development in 2016 decreased by 21% to RUB60.8 billion (2015: RUB76.5 billion). The share of such investments in total industry financing was 8% (2015: 13%).

2017 Industry Outlook

Federal Road Network Development 

A total of 326.2 km of federal highways is scheduled for commissioning upon completion of construction and reconstruction projects in 2017 (2016: 303.6 km).

Construction of the Kerch Bridge and its approaches on the side of the Krasnodar region, construction and reconstruction of segments of federal highways in the Far East, North Caucasus, Moscow and St. Petersburg transport hubs maintain their importance. Plans include completion of construction and reconstruction of segments and traffic interchanges of the M-7 «Volga» Highway in the Moscow region and the Republic of Tatarstan, as well as reconstruction of the M-18 «Kola» Highway in the Murmansk region, M-10 «Russia» in the Tver region, etc.

Development of Additional Main Tracks and New Railways

2017 priorities:

1. Construction of the Moscow – Kazan high-speed railway.

PJSC Russian Railways and PJSC High-Speed Railways are currently updating organizational, legal and financial models for the Moscow-Kazan high-speed railway construction project, taking into account the results of technology and budget audits of engineering surveys, design documentation for the Moscow – Nizhny Novgorod segment of the railway, including assessment of technical requirements and high-speed rolling stock limitations, operation and maintenance technologies, based on the proposed design solutions. Development of the project design and budget documentation is expected to be completed by 30 June 2017, with subsequent technology and budget audits, as well as a state technical assessment of the project in accordance with the existing Russian legislation.

2. Continued implementation of the following projects:

  • «Development and Upgrade of Railway Infrastructure on the Approaches to Ports of the Azov and Black Sea Basin»
  • «Development of Railway Passenger Transport on the Zhuravka – Millerovo Segment»
  • «Comprehensive Development of the Mezhdurechensk – Taishet Segment of the Krasnoyarsk Railway»
  • «Modernization of the Railway Infrastructure of the Baikal-Amur and Trans-Siberian Railways, Including Development of Carriage and Traffic Capacity».

3. 2018 World Cup transport infrastructure development projects. Completion of subway development in Nizhny Novgorod and St. Petersburg

4. Construction of the Kerch Bridge and transport infrastructure development in Crimea.

The above projects are expected to increase the length of commissioned additional main line tracks and new railways in 2017 to 717.2 km  (2016: 441.6 km).

Airport Network Development

Key 2017 priorities:

  • Completion of reconstruction of airports in cities included in the 2018 World Cup preparation program, including reconstruction of infrastructure at the Moscow (Sheremetyevo, Domodedovo), Kaliningrad, Volgograd, Saransk, Nizhny Novgorod, Samara and Yekaterinburg airports
  • Reconstruction of airports of the Far Eastern Federal District, Baikal Region and the Arctic zone, including reconstruction of infrastructure at the airports of Yakutsk, Khabarovsk, Norilsk, Ulan-Ude, Chorkuda, Srednykolymsk, Sakkyryr, Tiksi, Ossora, Zeya, Bomnak and Ekimchan, and development of design documentation for reconstruction of the Milkovo, Beringovsky and Herpuchi airports
  • Reconstruction and construction of facilities with a high level of technical readiness: reconstruction of infrastructure at the Nizhnekamsk and Kyzyl airports.

A total of 9 runways are expected to become operational in 2017, up from 2 in 2016.

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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