Feb 15, 2008: High-Speed Light Railway Attracts Investors

Top managers from around 180 companies attended a presentation of the Nadzemny Express (Nadex) project, which a delegation of St. Petersburg officials hosted in London on February 7-8. City Hall claims that potential investors “are increasingly interested” in the construction of this new light railway.

As a result of the presentation, the European Bank for Reconstruction and Development announced that it would provide a loan for 18 years either in rubles or in a foreign currency to the company that wins the tender. Vnesheconombank also stated that it is ready to finance the project.

“We consider this presentation to be a success. We are waiting for applications to select participants who satisfy the requirements,” Maxim Sokolov, chairman of City Hall’s Committee for Investment and Strategic Projects, said Tuesday in a statement.

In December last year, City Hall announced a tender for the construction of the 30-kilometer high-speed railway. The route will start from two western points — the Congress Center at Strelna and the Baltic Pearl development site — and pass through five districts of the city as far as Obukhovo.

The new railway will intersect with the metro and suburban railway stations, and in the future lines to Pulkovo airport and Peterhof could be added. Experts forecast that the railway will serve 180,000 people a day.

Nadex is scheduled to open in 2010. However, the winning company will have to focus not only on the deadline, but also on the reliable operation of the railway, since the winner will operate it for 30 years.

The proportion of funding that the bidder is ready to provide and the proportion that it requires from the city budget will be one of the main criteria for bid evaluation.

Organizers of the tender insist that bidding consortiums should include construction companies, equipment producers and transportation professionals. In addition, there are also requirements concerning ecological safety, noise levels and the reliability of the railway’s operation.

The city government will approve ticket prices for Nadex, while the railway operator will provide a fare collection system. The operator will give the revenues from ticket sales to the city budget, minus an agreed commission fee.

Without specifying any particular names, Sokolov said that several leading transportation companies were negotiating with St. Petersburg officials on the project.

“The meeting in London was representative enough,” said Pavel Brusser of Grant Thornton audit and consulting company.

Brusser suggested that technological companies like Bombardier, Siemens and Mitsubishi would be interested in the Nadex project. “Companies producing light railway carriages will obviously be interested,” he said.

From a technical point of view, construction of the railway by 2010 is realistic, Brusser said, but there could be delays in getting state funding. “Much will depend on whether the project is realized in accordance with the federal Law on Concessions or the St. Petersburg law,” Brusser said.

He suggested that the government would approve a ticket price corresponding to the average ticket price for public transport in the city. The price could be slightly higher, due to increased speed and comfort.

“I think this project should attract investors. No similar projects have been realized in Russia, and this project could be replicated in other cities, for example in Sochi,” Brusser said.

However, there are a number of risks associated with the project. One of them, Brusser indicated, is that some parts of the railway will pass through narrow streets like those located near Prospekt Veteranov metro station.

“The local population is always wary. But there is a standard procedure of public hearings to deal with possible disputes,” Brusser said.

The tender committee will start examining bids in May this year, and the results of the tender are due to be announced in December.