MegaProject 988: New lenders for Moscow road PPP
- DSK Avtoban
- Eurasian Development Bank (EDB)
- Sberbank of Russia
- Herbert Smith Freehills
- Freshfields Bruckhaus Deringer
- Arup Group
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Russian construction company DSK Avtoban has announced it has secured new lenders for stage three of the Moscow Central Ring Road, one of the largest infrastructure projects in Russia.
Sberbank and the Eurasian Development Bank (EDB) have agreed to join Gazprombank in providing a RUB38.5 billion (US$646.6 million) loan.
As we reported in March 2017, the project achieved financial close. Gazprombank signed a RUB35.6 billion (US$600 million) loan to finance to project. DSK Avtoban originally agreed to provide the entire RUB6 billion (US$100 million) of equity, however the EDB purchased a 25% stake in the SPV last month.The EDB will commit RUB 2bn of equity.
EDB experts stress that construction of this road is of key importance for the transport sector as it would bring down freight and logistics costs. From the Bank’s perspective, this project is characterised by a large integration component as its implementation will help develop a range of major international transport corridors within the framework of the Europe-Western China route.
The remaining project cost will be provided by state-owned Avtodor.
The project involves the construction, maintenance, repair and overhaul of 105.3 kilometers, which will go in parallel to the Small Concrete Ring A-107 in the North-East of the Moscow region. The project will also join the new Moscow-Saint Petersburg express highway with M-7 Volga highway.
The highway will have four traffic lanes and there will be 55 bridgeworks (including 20 bridges and 35 flyovers) and 4 multilevel crossings. The traffic volume expected for 2030 is 43,500 cars per day. Additionally, the facility will be operated on a toll basis. The project is expected to complete construction by the end of 2019.
The total cost of construction of the project is over RUB80 billion (US$1.37 billion).
Herbert Smith Freehills (legal) advised DSK Avtoban. Freshfields (legal) and Arup (technical) advised the lenders.
In August, 2014, Avtodor launched the tender processes to develop the third and the fourth sections of Moscow Central Ring Road (CCR) project. In October 2014, the tender commission received five bids but in January 2015, due to the changed macroeconomic conditions, the Ministry of Transport of the Russian Federation decided to postpone the bidding deadline for both tender procedures.
After receiving just one bid for the project in a new tender in April 2016 from the consortium of Avtodorozhnaya Stroitelnaya Korporatsiya, LLC, which includes DSK Avtoban, OJSC and Spanish company Sacyr Concession, Avtodor signed an agreement with the consortium for building and exploitation of the project.
Timur Abdullakhanov, Managing Director, Head of EDB Directorate for Transport and Infrastructure, said:
“If implemented, this large-scale, capital intensive project will offer a global solution to several issues at a time: first, it involves mobilisation of private capital to finance infrastructure projects using the PPP mechanism in the Russian Federation; secondly, it promotes economic growth of certain regions and countries, as transport infrastructure enables flows of goods and services and, thus, is one of the Bank’s priority areas of activity.”