OREANDA-NEWS. March 16, 2010. Transcript of the beginning of the meeting:

Vladimir Putin: Mr Levitin, you must know that a resolution has been signed providing state guarantees to companies involved in joint construction projects with the government to build national infrastructure facilities, such as motorways, railways, seaports, and airports including runway facilities.

The resolution would in fact pave the way for concession agreements between the state and private business. Let me remind you that a private investor would have to invest at least 25% of the total project cost; in this scenario the investor would have the right to operate the new facility until the project begins making a profit, and a fair share of the profit.

There is a supplement to this government resolution spelling out the procedure for financing three specific infrastructure projects - the Moscow-St Petersburg highway (25 billion roubles), a bypass road around Odintsovo in the Moscow Region (8 billion roubles) and the so-called high-speed diameter in St Petersburg.

I would like to hear now about your timeframe for these projects and what steps are you planning for the implementation of the resolution.

Igor Levitin: Mr Putin, you have instructed the government to find new sources of financing for transport infrastructure projects. This effectively takes us to a new level of operation. It is our first possibility to use long-term loans to finance transport infrastructure projects. The existing legal framework allows companies involved in the concessions to sign agreements with the Finance Ministry and to obtain state guarantees, which they have to place on the market.

Russian-based and foreign banks can participate. We also hope that interest on such guarantees will not exceed a level which enables the concessioners to meet the conditions of the contracts they have won.

Vladimir Putin: You mean bank interest on loans secured by such guarantees?

Igor Levitin: Exactly. We do hope it would be affordable, because the concessioners won contracts stipulating fixed transport service fares. We'll keep the situation well in hand.

I can tell you that we have already found concessioners for two projects.

There is a consortium which will help build the Moscow-St Petersburg motorway on plot 1558. The consortium includes a French company which will also procure guarantees from its own government; with a Russian government guarantee added, one can assert that this project lineup is complete.

As for the Odintsovo bypass with a link to the Moscow-Minsk road, a foreign consortium will be participating along with Russia's Gazprombank. The conditions are similar to the other project. It was agreed during negotiations that the concessioners would not set a low traffic requirement for the government.

We reached an agreement - they agreed to this condition - because these are the first projects of their kind. I think that the resolution you have just signed will help keep the overall level of state support below 75%.

Vladimir Putin: The Odintsovo bypass.

Igor Levitin: It is our strategic project. This road will be operated by [state road management company] Avtodor, that was established for this purpose. We have also proposed to the government that Avtodor be allowed to issue bonds to finance its own needs (3 billion roubles in 2010).

This is in fact Russia's first experience with concession agreements. However, historically, the first railways in Russia were built by concessions. The government first provided them with guarantees and then bought them out.

Vladimir Putin: This is how Russia's first railway was built 100 years ago.

Igor Levitin: I would like to thank you because this support is especially important for us, considering the current shortage of budget funds. We are beginning to use other sources of financing for transport infrastructure projects.

Vladimir Putin: Mr Levitin, please keep an eye on the process to ensure that all legal requirements are met while implementing these infrastructure projects. All the required expert evaluations need to be conducted on time.

Igor Levitin: Certainly.