Northern Capital Highway (NCH) consortium has been named the preferred bidder in the tender for the right to construct the central part of the Western High-Speed Diameter (WHSD) and subsequently operate the entire stretch of the toll road. The consortium is comprised of VTB Capital, Gazprombank and international construction companies Astaldi (Italy) and Ictas Insaat (Turkey). WHSD is a strategically important investment project both for the city and the Russian Federation that will determine St. Petersburg’s development as a major international transport hub and will create the first toll road operated within city limits in Russia. Today, WHSD is the largest project in Russia implemented within the framework of the public-private partnership mechanism.
NCH’s bid proposes a minimal WHSD toll revenue guarantee by the city of St Petersburg of RUR 9.67bn per annum. Should the actual project revenue exceed this amount, NCH will pay 90% of the excess to the city. It is expected that following the construction of the central part of the road, toll revenues from the Western High-Speed Diameter traffic will soon reach the level of the minimal revenue guarantee, which means that the city will not have to allocate significant funds from its budget to support the project. The level of the minimal revenue guarantee proposed by NCH was significantly lower than that proposed by its competitor enabling significant budget savings.
WHSD’s central section is the most technically complex to build part of the road and includes three bridges (among them two cable stayed) and a tunnel. The expected investment is estimated by NCH at approximately RUR 120bn (€3bn) and will be financed through a combination of debt and equity, as well as the federal grant of approximately RUR 51bn. The consortium has already received debt financing proposal from VTB and Gazprombank (the second and the third largest banks in Russia). NCH is expecting to sign the public private partnership agreement with St Petersburg in December 2011.
Infrastructure investment is one of VTB Capital’s strategic priorities. The implementation of the Western High-Speed Diameter project is in line with VTB Capital’s plans to develop infrastructure projects in Russia utilizing public-private partnership mechanisms. VTB Capital is also the lead investor in the Northern Capital Gateway consortium which has won the right to modernize and operate the Pukovo airport in St. Petersburg. The Pulkovo airport PPP transaction has been recognized by a number of awards from leading international industrial publications including the Infrastructure Journal, the Infrastructure Investor and Euromoney, as well as the award for the best global public-private partnership project of the year.
VTB Capital also acted as the arranger of a successful RUR 10 bn issue of the OJSC “Western High-Speed Diameter” 20-year RUR bonds. The deal saw significant level of investor demand providing an attractive coupon rate for the issuer. Proceeds of this bond issue, alongside financing from the city’s budget and federal subsidies will be used to finalise the construction of the highway’s southern and northern sections.
Oleg Pankratov, Co-Head of Global Banking, Head of Infrastructure Capital & Project Finance at VTB Capital and the Chairman of the NCH Board, said: “We are very pleased with the outcome of the tender and that the proposal of the Northern Capital Highway consortium was recognised as the optimal for the city of St. Petersburg. This is a further step in strengthening VTB and VTB Capital’s leading position in the infrastructure investment market in Russia. To implement the project we have brought the best expertise available. We are convinced that our consortium has the unique experience of successfully implementing large-scale infrastructure projects as well as raising the required financing.”