Russia Infrastructure Report Q4 2009

In BMI's Q409 Russia Infrastructure Report we have revised down our forecasts for 2009 following worse than anticipated Q109 results. We are now forecasting Russia's construction industry to contract by 15.77% y-o-y in real terms in 2009, to reach a nominal value of RUB2.24trn (US$67.5bn).

Data released by Russia's statistics agency, Goskomstat, revealed that in the first quarter of 2009, Russia's construction industry contracted by 10% y-o-y in nominal terms. This has led us to revise down our forecasts for the year. Still assuming that the second half of the year will be stronger than first half, we now believe that instead of achieving nominal growth over 2009 (and a -7.5% real contraction), there will be a nominal contraction of 4.12% y-o-y in Russia's construction industry. With high levels of inflation expected in Russia for the year (consumer inflation expected to average at 11.7% for the year) this will push real growth in the industry down to -15.77%.

As previously mentioned, we are still optimistic for an improved second half of 2009, and recent developments in the country's infrastructure sector substantiate this. The biggest news from the sector over the last quarter is the awarding of the tender for the Pulkovo Airport in St. Petersburg. The US$1.3bn contract to upgrade the airport was awarded to the Northern Capital Gateway (NCG) consortium, which consists of Fraports AG, VTB Europe PLC - which is the UK-based division of Russian bank VTB Group - and Horizon Air Investments, the airports arm of Greece's Copelouzos Group. The contract can be seen as something of a bellwether for Russia's infrastructure sector, and a good indication of private investors' attitudes to the country's business environment. The message seems to be a mixed one.

A number of major players dropped out of the bidding, but three secure bids made it through, and although it was somewhat delayed, the project was successfully tendered. The true test will come at the financing stage, as access to credit is still limited in Russia. However with early commitments of funding offered by the European Bank for Reconstruction and Development, the World Bank's IFC and Russia's VEB Bank, this may prove a less challenging obstacle than expected.

In the utilities sector, majority state-owned hydropower company RusHydro is driving investment in renewables (including hydropower) and has partnered up with Japanese companies Mitsui and J-Power for the construction of a wind farm on Russky Island and a hydropower plant in Russia's Far East.

Despite ongoing activity, it is still clear that overall activity in the infrastructure sector is reduced compared with last year, with investment budgets being cut over the short term, state-funding unpredictable and private investment scarce.

• Executive Summary
• SWOT Analysis
• Russia Infrastructure Industry SWOT
• Russia Political SWOT
• Russia Economic SWOT
• Russia Business Environment SWOT
• Market Overview
• Global Overview
• Governments To The Rescue: The Global Surge In Infrastructure Spending
  • Table: Infrastructure Stimulus Plans List
• Major Infrastructure Developments And Key Projects
• Transport
  • Table: Passenger Traffic At Russia's Eight Busiest Airports
• New And Ongoing Projects
• Airports
• Ports
• Roads And Bridges
• Railways
  • Table: Russia ??