It is proposed to expand the railway infrastructure near Novorossiysk on loan

“Kommersant” became aware of the details of the project to expand railways on the approaches to Novorossiysk, which Ruslan Baysarov spoke about last week at a meeting with Vladimir Putin. BTS-Most and Gazprombank want to increase the infrastructure capacity from 8 million to 43 million tons. It is proposed to finance the construction, as in the case of the BAM tunnels, through the EPCF scheme through private investment. The consortium will borrow funds, but after ten years they will have to be returned. The prospect of an increase in freight tariffs in connection with this does not please market participants, who confirm the relevance of the project.

The company Bamtonnelstroy-Most (BTS-Most) of Ruslan Baysarov told Kommersant the details of the expansion project to fivefold expand the capacity of the Novorossiysk transport hub (NTU).

At a meeting with Vladimir Putin on January 18 (see Kommersant on January 19), Mr. Baysarov said that the company is now implementing the first stage of development of the NTU, after which its throughput will reach 8 million tons. Then the businessman added: “Together with Gazprombank, we came up with a proposal to implement the second stage through private investment with an increase in throughput to 43 million tons.”

As Vitaly Shishmarev, deputy general director for long-term development of BTS-Most, explained to Kommersant, the consortium took the initiative to implement the second stage of construction under the deferred payment contract scheme (EPCF) within ten years after completion of construction.

Construction will be carried out by attracting loan financing and without budgetary funds, he added. He did not name the amount, clarifying that the implementation period of the second stage of the project, as well as the volumes and types of work that should be included in it, are now being considered by the partners and the Ministry of Transport. Gazprombank declined to comment.

JSC Russian Railways told Kommersant that they are not discussing such a proposal with BTS-Most and Gazprombank. The Ministry of Transport declined to comment.

“The EPCF format simply assumes that the contractor is responsible for all four blocks – design, procurement, construction and financing,” explains Alexandra Galaktionova, CEO of the analytical company Sherpa Group. “We do not have the concepts of EPC, EPCF, EPCM, EPCFM and other forms enshrined in the legislation “

So, in fact, the parties can discuss any conditions convenient for themselves, including the size of the loan rate and the funds that the customer will have to return to the contractor, she continues: “It all depends on what the macroeconomic conditions and rates will be at that time and so on”. She notes that for a classic EPCF, ten years is quite a long time.

The southern direction of railway exports was not surplus even before the outbreak of hostilities. After the closure of airports in the south and, as a consequence, the intensification of passenger traffic, especially during the holiday season, and the intensification of the terrorist threat, capacity problems worsened. The need to increase the railway capacity of the Novorossiysk transport hub has been long overdue, says a Kommersant source in the transport market. “According to the NTU development program, the station’s capacity should be increased to 43 million tons as early as 2024,” he says. “Based on projects for the development of sea terminals, the need for railway station capacity by 2030 could reach 60 million tons.” The shortage of railway infrastructure leads to a multiple increase in road transport in communication with the port and limits the growth of transshipment volumes through the port of Novorossiysk, says Kommersant’s interlocutor.

Port owners welcome the prospect of expanding the GTU. “We will handle everything that is brought to the port of Novorossiysk,” they say at Transneft (according to Kommersant’s information, NCSP, which belongs to it, now handles approximately 24 million tons of cargo with a capacity of 44 million tons, excluding liquid hydrocarbons) . The Delo Group of Companies says that, taking into account the needs of Russian foreign trade, they are systematically increasing the capacity of their terminals in Novorossiysk – both container and grain. “At the end of 2023, we processed record volumes – 603 thousand TEU and 8.2 million tons of grain,” the group says. “The capacity of the Novorossiysk station remains the limiting factor for increasing shipments through this direction.”

Expanding capacity near Novorossiysk is not the first proposal by BTS-Most and Gazprombank to use EPCF in railway construction. Thus, in 2022, the consortium came up with a concession initiative for the third part of the third stage of expansion of the BAM and Trans-Siberian Railway, within the framework of which expensive structures should be built – the second Severomuysky, Kuznetsovsky and Kodarsky tunnels and a bridge across the Amur, as a result of which the throughput will have to increase by 45 million tons – up to 255 million (see “Kommersant” dated June 1, 2022). The required investments were estimated at 520 billion rubles. In the fall of 2023, the consortium clarified that, as an alternative to the standard method of financing, an EPCF scheme is proposed, which does not require government funding at the design and construction stage (see “Kommersant” dated September 12, 2023).

But even then it was not clear how it was planned to eventually return the borrowed funds. Kommersant’s sources said that Russian Railways will return them, and the only way the company can ensure this is by raising the network-wide freight tariff, which will cause indignation among shippers.

In the case of Novorossiysk, Ms. Galaktionova believes, the customer, presumably, should also be JSC Russian Railways: “Even if something is compensated from the budget, it will probably be through JSC Russian Railways.” A Kommersant source familiar with the discussion says that the proposed investments in the second stage of the NTU near Novorossiysk are comparable to the funds for tunnels and bridges on the BAM and amount to about 500 billion rubles, and Russian Railways will have to return a much larger amount, taking into account interest.

The prospect of increasing tariffs to finance construction – be it some kind of investment tariff for local players or a network-wide tariff – is met with caution by companies operating in and through Novorossiysk. “The increased tariff will hit the economy of shippers and producers of export products,” notes one of them. Delo Group of Companies noted that when setting tariffs, it is fundamentally important to adhere to a “balanced long-term approach” so that working conditions are predictable and allow the implementation of long-term investment projects.

Natalya Skorlygina