Money went astray – Newspaper Kommersant No. 66 (7511) of 04/17/2023

In the first quarter, budget financing for the construction and modernization of the main infrastructure decreased by 2.4 times year on year. Contractors of state construction projects received only 33.2 billion rubles. With the current instability of prices for materials and equipment, a decrease in advance payment entails an increase in the cost of construction, experts and market participants warn. As a result, contractors who have concluded fixed-price contracts with government customers for large construction projects are at risk of facing serious cash gaps. This, builders warn, may affect the timing of completion of projects.

At the disposal of Kommersant was a study by Sherpa Group, which says that in January-March the pace of disbursement of funds from the Russian budget under the national project “Comprehensive Plan for the Modernization and Expansion of the Main Infrastructure” (KP) slowed down.

Contractors received 33.2 billion rubles, which is 2.4 times less year on year. This is 20.7% of the total amount allocated for the implementation of the plan in 2023.

In the first quarter of 2022, 26% of the KP budget was disbursed. The Ministry of Transport, which oversees the implementation of the comprehensive plan, did not respond to Kommersant’s request.

The first quarter of 2022, according to Sherpa Group CEO Alexandra Galaktionova, turned out to be a record and “even anomalous” in terms of the amount of allocated funds for the KP, especially against the backdrop of January-March 2019-2021, when government construction contractors received only 5-12% of annual budgets .

Last year, this supported the construction industry against the background of the economic and financial crisis that unfolded after the outbreak of hostilities in Ukraine: contractors, through participation in the state program, were able to offset losses due to a slowdown in the construction of commercial facilities.

In 2022, more than 35% of the funds from the country’s budget for such projects are allocated year on year. As a result, road and rail builders managed to increase revenue most noticeably — by 20–25% year-on-year.

Mikhail Burmistrov, CEO of Infoline-Analytics, attributes the decline in disbursement in the first quarter of 2023 to the fact that Russian Railways issued advances to BAM and Transsib contractors totaling RUB 39.4 billion last year. from the budget for this year. “These funds could be taken into account in the fourth quarter of 2022,” the expert suggests. However, he still considers the current dynamics of budget development under the KP “unfavorable against the backdrop of overall unprecedented budget spending” since the beginning of 2023.

If the situation does not change, this may create additional risks for contractors, Mr. Burmistrov believes. This threatens contractors with cash gaps and problems with financing subsequent work and deliveries, which will inevitably affect the timing of the completion of construction, agrees the general director of Smart Engineers Group of Companies Hussein Pliyev.

With the current instability in prices for building materials, any delay in advance payments entails an increase in the cost, which, with the signed state contracts with a fixed price, reduces the profitability for contractors, adds Oleg Malakhov, a member of the General Council of Business Russia. The problem is aggravated by the fact that after the introduction of EU and US sanctions against Russia, alternative suppliers have not yet been found for all types of raw materials and equipment, and logistics has not completely stabilized, Mr. Pliev adds.

Specialized contractors have few alternatives to state-owned construction projects in the current environment.

Developers, unlike the state, cannot offer such a volume of orders that would allow companies to fully utilize their capacities, Alexandra Galaktionova believes.

In addition, the number of large commercial projects has been seriously reduced, says Mikhail Burmistrov. For example, this year only 200,000 sq. m. m of office real estate in Moscow, which is one and a half times less than last year (see “Kommersant” dated January 26). Due to the decrease in demand, the commissioning of new residential projects is also reduced. The construction of logoparks has also slowed down: in 2023, according to NF Group forecasts, the volume of commissioned warehouses in Moscow and the Moscow region may reach 1.6 million square meters. m, which is 18% less year on year.

Daria Andrianova