BAM will be fully expanded

The state decided to implement the third stage of development of the BAM and Trans-Siberian Railways with the expansion of carrying capacity to 255 million tons. As part of the BTS-Bridge project, Ruslana Baysarova will build three expensive tunnels and a bridge across the Amur according to the EPCF scheme. The funds will come from the tariff paid by shippers. The state will make its contribution by indefinitely extending the preferential property tax rate of 1.6%, and will also stop requiring Russian Railways to bring all tracks into a standard state by 2035, shifting this period by another ten years.

BTS-Most will still build four large facilities on BAM-3 worth about 500 billion rubles. This follows from the list of instructions issued by the president on December 30, a source familiar with its content told Kommersant. Thus, by March 31, the government, together with JSC Russian Railways and BTS-Most, was instructed to ensure that JSC Russian Railways concludes “general contract agreements with deferred payment conditions” for the construction of the second Severomuysky, Kodarsky and Kuznetsovsky tunnels and the bridge over the Amur, “having previously specified the financial model, the timing and cost of their construction, as well as securing the contractor’s obligations to finance a possible increase in the cost of these objects. BTS-Most did not explain whether it was ready to fulfill the condition. Russian Railways declined to comment.

The second stage of expansion of the BAM and Trans-Siberian Railway, which is due to be completed this year, should be followed by a third with an expansion of carrying capacity from 180 to 210 million tons by 2030 and 255 million tons by 2032. The final stage involves the creation of backups for the Severomuysky, Kuznetsovsky and Kodarsky tunnels and a bridge across the Amur.

BTS-Most and Gazprombank plan to build these facilities through the EPCF contract. He assumes that the contractor undertakes construction and financing, and after ten years the customer—presumably Russian Railways—pays him (see “Kommersant” dated September 12, 2023). The cost of the third stage, according to departments, will be about 2.7 trillion rubles. (see “Kommersant” dated January 29). The last estimate that Kommersant saw in the documents of the Ministry of Transport was 2.73 trillion rubles: 2.26 trillion rubles. — objects of JSC Russian Railways and 471 billion rubles. — EPCF objects. The BAM-3 passport must be approved by the end of March.

The FAS was instructed, together with the relevant departments and JSC Russian Railways, to submit proposals on tariff decisions to finance the investment program, “paying special attention to the impact of these decisions on the financial and economic condition of shippers and the final price of transported goods, changes in the structure of cargo movement in certain directions and electricity tariffs” , says Kommersant’s interlocutor.

The state will also make its contribution. According to the instructions, by September 1, changes to the legislation must be adopted that will indefinitely extend the preferential property tax rate for public roads. Now it is 1.6%, but is valid only until 2026. Also, until 2033, the deadlines for applying the features of the implementation of priority projects for the modernization and expansion of infrastructure, provided for by the relevant law, should be extended. These standards allow for faster design and construction of priority facilities.

The decision on the tax rate for Russian Railways is extremely important, says Vadim Tedeev, managing partner of IPM Consulting. He explains that at a rate of 1.6%, Russian Railways OJSC has been paying property tax since 2020: “Now, apparently, despite the Ministry of Finance, which objected to the “indefiniteness” of the measure, the most loyal and supportive option for Russian Railways OJSC has been adopted, which in an era of unprecedented sanctions are more relevant than ever.” Extension of deadlines for the implementation of priority projects of JSC Russian Railways for the modernization and expansion of infrastructure is an expected decision, Mr. Tedeev believes: the deadline expires this year, but cannot be implemented due to sanctions and numerous difficulties (for example, problems with contractors, lack of labor and a sufficient amount of equipment).

Another measure is the extension of the railway overhaul program until 2045. In June 2021, Vladimir Putin ordered an inventory of the condition of the tracks to check for bottlenecks and approve a program for bringing the infrastructure to the standard level. JSC Russian Railways has developed a program. Initially, it assumed reaching the standard level in 2030 (see “Kommersant” dated December 29, 2021), but the monopoly immediately asked to move the deadline to 2035, emphasizing the risks associated with imposing the program on regular cargo export activities and large-scale construction projects. In this form, the program was adopted at the end of 2022 with an estimate of about 7.6 trillion rubles. (see “Kommersant” dated January 9, 2023). It is now proposed to shift the deadline by ten years.

The head of Infoline-Analytics, Mikhail Burmistrov, notes that the instructions “show a course towards optimizing plans for BAM-3 and bringing it to reality.” Much “is subject to the idea that it is impossible to build, transport and repair so much at the same time.” This is related to the decision to extend the program to bring the track into a standard state, the expert believes. BTS-Most will have to resolve difficult issues given the high cost of borrowing at the current key rate, he notes.

It is beneficial for JSC Russian Railways to shift the burden of financing these facilities to the concessionaire, says Mr. Burmistrov: in ten years, when the funds need to be returned, there is a possibility of a cessation of hostilities, a change in the sanctions background and a reduction in the rate. In addition, future cash flows are heavily discounted: at a key rate of 7% they depreciate by half, at 12% – by 3.1, and at 16% – by 4.4. According to the expert, an important thesis of the order is the need to assess the impact of tariff decisions on the financial and economic condition of shippers and the price of goods.

Natalya Skorlygina