June 3, 04:25 (UTC+3)

Putting long-term capital to work for infrastructure development


  • Limited sources of long-term capital

"In Russia, pension assets account for ca. 3.4% of GDP, while in the US this number stands at 72.7%, in the UK at 88%. Looking at insurance assets, we see that in Russia their share (2.2% of GDP) is 20 times less than in the US and 35 times less than in the EU. Even with China, there would be a 6x difference. This means a very scarce availability of long-term money," said Nikolay Tsekhomskiy, First Deputy Chairman of Vnesheconombank.

  • Low willingness of private investors to participate in infrastructure projects

"Investors face significant constraints. For banks, it is the famous Basel. Institutional investors are just at the very beginning of shaping approaches to investing in infrastructure projects. Developers have their own story – not all of them have gotten over the Olympics yet," said Sergey Nekrasov, First Vice-President, Gazprombank.

"Most often, the money risk that an investor can afford to take is incommensurate with the project risk," said Nikolai Podguzov, Deputy Minister of Economic Development of the Russian Federation.

"We are facing some kind of a trust deficit: trust in projects and in people structuring them," said Evgeniy Ditrikh, First Deputy Minister of Transport of the Russian Federation.

  • Scarce or underdeveloped projects

"What is troubling is that there are no projects. We have been an official adviser to the housing and utilities fund for a year. Only 67 projects were submitted for our review from all over Russia," said Mikhail Kuzovlev, Chairman of the Management Board, Rossiysky Capital Bank.

"We have the North-West development projects and projects to access Black sea ports. They have been digitised and documented," said Vadim Mikhailov, Senior Vice President for Economics and Finance, Russian Railways.

"The speculations about the lack of projects and their quality are not always true. The projects won't be structured more accurately than what we have now," added Evgeniy Ditrikh.

  • Low competencies in project financing and project structuring

“Although you will find some of the required competencies in the central areas, on the regional level no one knows how to put these projects together,” said Mikhail Kuzovlev.

“We lack the culture of project financing, the culture of investing and the culture of project risk controls. Oftentimes, the very understanding of the concept is missing,” said Nikolay Podguzov.

  • Room for improving legal framework for infrastructure transactions

“A year ago, when we looked into syndication opportunities, we realised that this concept does not exist in Russian law at all, and most of such transactions are made under English law,” said Nikolay Tsekhomsky.


  • Smart targeted government support at the level of specific projects and project segments

“When it is difficult to align risks with investors’ interests, a selective government support may be offered to make investments viable,” said Nikolay Podguzov.

  • Non-governmental pension funds as a source of long-term capital

“Pension money are essentially long-term money. With RUB 4.2 trillion <…> we can generally meet the need,” said Sergei Belyakov, President, Association of Non-State Pension Funds (ANPF)

  • Creation of a VEB-based project financing factory

“We are ready to take credit risks. We are prepared to look into project quality, assess their payback ability, and get involved in terms of project management, but we are not really willing to assume interest risks to the full extent,” said Nikolay Tsekhomsky.

  • Concessions

“In our opinion, concessions are one of the most efficient mechanisms for complex infrastructure projects. They allow to balance harmoniously the interests of the public and private partners,” said Sergey Nekrasov.

“Concessions are a solution for a number of issues. First, we share risks with investors, second, we do not post this debt on the company’s books. Investors’ returns are slightly above what they would earn from our regular securities,” said Vadim Mikhailov.