EBRD Loan Backs Modernisation of Russian Freight Rail Industry
OREANDA-NEWS. July 03, 2012. The EBRD has signed up to a 2.5 billion rouble (equivalent to EUR 60.0 million) loan to Globaltrans to assist one of Russia’s leading private freight rail transportation groups in the modernisation of the Russian freight rail industry, reported the press-centre of EBRD.
This is the EBRD’s first rouble denominated transaction using Roisfix, an index based on Ruonia OIS fixings. The EBRD aims to continue to develop the Roisfix index and to offer it to clients as an alternative to MosPrime. The Roisfix index is seen as a less volatile alternative to MosPrime and therefore is expected to be a more attractive option for domestic borrowers.
Globaltrans is a leading private freight rail transportation group that actively invests into expanding its business. The group was established from scratch during the early stages of the Russian freight rail industry reform and has rapidly grown to become one of the largest groups handling rail freight in Russia.
The group has this year contracted for 10,000 railcars and its strategy envisages further business growth as the Russian rail freight market liberalises.
It currently operates 56 locomotives and intends to capitalise on this experience to expand this area of business further once the relevant legal and regulatory framework is in place.
EBRD’s seven-year local currency loan is intended to fund part of the cost of the 10,000 freight railcars contracted by the group, as well as planned investments in railway engines once liberalisation of the locomotive market is completed.
At present, a quasi monopoly on locomotive traction exists in Russia. The locomotive fleet is largely obsolete and regulators are keen for private sector involvement to modernise it. Over USD 30 billion are estimated to be needed to upgrade Russia’s locomotive fleet alone over the next 15 years.
Despite global economic difficulties, Russian rail transportation volumes continue to rise. In 2011, rail transport accounted for over 43 percent of Russia’s freight movements. Were pipeline traffic excluded from the calculations, this would be 87 percent. Coal, oil products and oil and metals account for two-thirds of the freight transported by rail in Russia.
Russia, which has the world’s second largest railway network after the United States, is expected to need 400,000-500,000 new railcars over the next 10 years. Private ownership of the railcar fleet stands currently above 70 percent and is due to rise to above 90 percent, according to the railway sector’s medium to long-term strategy.
The borrower is New Forwarding Company (NPK), a wholly-owned subsidiary of Globaltrans Investment a Cyprus-registered holding company which consolidates the freight rail transportation business of Russia’s N-Trans group.
In 2008, the EBRD acquired a 3.2 percent stake in Globaltrans for USD 49.55 million at its London IPO.
A reform of the Russian railway sector was launched in 2001 with the aim of encouraging private sector participation in rail operations as well as critically needed investment in both rolling stock and infrastructure.
The EBRD has invested over USD 1.6 billion in 13 railway and associated projects in Russia since the sector’s structural reform began in 2001.
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