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Russia Infrastructure Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: August 2009 Product Code: R302-7646 Description In BMI’s Q409 Russia Infrastructure Report we have revised down our forecasts for 2009 followingworse than anticipated Q109 results. We are now forecasting Russia’s construction industry to contract by15.77% 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 downour 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), therewill be a nominal contraction of 4.12% y-o-y in Russia’s construction industry. With high levels ofinflation 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 recentdevelopments in the country’s infrastructure sector substantiate this. The biggest news from the sectorover the last quarter is the awarding of the tender for the Pulkovo Airport in St. Petersburg. The US$1.3bncontract to upgrade the airport was awarded to the Northern Capital Gateway (NCG) consortium, whichconsists of Fraports AG, VTB Europe PLC - which is the UK-based division of Russian bank VTBGroup - and Horizon Air Investments, the airports arm of Greece’s Copelouzos Group. The contractcan be seen as something of a bellwether for Russia’s infrastructure sector, and a good indication ofprivate 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, andalthough it was somewhat delayed, the project was successfully tendered. The true test will come at thefinancing stage, as access to credit is still limited in Russia. However with early commitments of fundingoffered by the European Bank for Reconstruction and Development, the World Bank’s IFC and Russia’sVEB Bank, this may prove a less challenging obstacle than expected. In the utilities sector, majority state-owned hydropower company RusHydro is driving investment inrenewables (including hydropower) and has partnered up with Japanese companies Mitsui and J-Powerfor 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 reducedcompared with last year, with investment budgets being cut over the short term, state-fundingunpredictable and private investment scarce. Table of Contents
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