How to make PPP work in Russia: 2012 Overview

Terms of financing

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Public officials are confident that the development of PPP practices is crucial for raising capital.

There is a wide gap between the opinions of representatives of the public and private sectors as to the optimum scope of a pilot regional project and the acceptable level of return on equity in PPP projects.

Representatives of credit institutions completely disagree with public officials on the acceptable level of return on equity in the current environment.

Size and profitability of pilot PPP projects in Russia

State bodies believe that 20% p.a. in rubles is an acceptable ceiling, credit institutions regard this as the bottom limit.

In assessing various ways of enhancing the bankability of projects, respondents from the public and non-public sectors express somewhat different opinions.

Assessment of measures to enhance bankability

Infrastructure investors from the non-public sector believe that state guarantees of return on investments play an important role in achieving a successful financial close.

By contrast, public officials are confident that the development of PPP practices, an increasing level of knowledge and expertise, a more thorough elaboration of projects and, consequently, higher competition among investors are crucial for raising capital.

Representatives of development institutions share both views and regard these groups of measures as equally important.

Respondents from the non-public sector have concerns about the low creditworthiness of the Russian regions.

The investment community would like to see more support from the federal government in implementing regional infrastructure projects.

Role of development

According to respondents, the following functions of development institutions are most in demand:

  • Disseminating experience in the area of the preparation and delivery of PPP projects and providing advice to state bodies
  • Financing the preparation of PPP projects
  • Providing various forms of “credit support,” including financing on favorable terms, guarantees, etc.

What role should development institutions play (Vnesheconombank, EBRD, Eurasian Development Bank, international financial institutions, etc.) in PPP projects?

Respondents think that the possibility of raising financing from development institutions on market terms is less important than other factors.

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