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‘Private Utility Infrastructure Operators’ Forum Addresses Ways to Raise Investment for Utilities Sector

12 December 2019
На форуме «Частные операторы коммунальной инфраструктуры» обсудили привлечение инвестиций в коммунальную сферу

Moscow hosted the 6th ‘Private Utilities Infrastructure Operators’ Russian Forum, which is part of the event series of the ROSINFRA Infrastructure Congress. The Forum was organized by the Roscongress Foundation and the PPP Development Centre. Sberbank is the general partner and InfraVEB is the strategic partner.

The Forum primarily focused on ways to raise private investment for housing and utilities services, ecology, and urban land improvements. It was attended by representatives of specialized government agencies, financial institutions, utilities operators, technology providers, and potential investors. The PPP Development Centre, with the support of InfraVEB, released an analytical review titled ‘PPPs in Public Utilities Infrastructure and Urban Land Improvement’ specifically for the Forum. The review presents statistics on the use of PPPs in the industry and key standard solutions. According to the Centre, 2,769 projects worth RUB 722 billion are currently being implemented in Russia in the utilities sector and they are mostly concentrated in municipalities.

“Attracting investors to the housing and utilities sector primarily means modernizing facilities and renovating infrastructure. This is why the government, for its part, is creating conditions for private business that is ready to invest in this industry”, Adviser to the Russian President Anton Kobyakov said.

The Forum kicked off with an open meeting of the public not-for-profit organization Russian Ecological Operator (REO), during which the participants discussed the waste management reform currently under way in Russia, funding for the industry, the state support measures that are required, and the problems that the market faces as it transitions to the new waste management system. The meeting was moderated by REO Deputy CEO Alexey Makrushin. The market participants noted the need for legislative amendments, difficulties with negotiating tariffs and hammering down the rules of the game for investors, lower prices for secondary raw materials as well as oversight and regulatory risks.

In parallel, the Forum included an expert session on judicial and antitrust practices in the utilities sector. Using specific case studies as examples, the participants examined the main problems that investors and public partners in the utilities sector face, such as the transformation of lease agreements into concessions and the failure to pay concession fees, among others. During a panel discussion titled ‘The Evolution of Approaches to Funding Concession Projects in Heat and Water Supply’, the speakers discussed problems related to raising debt financing using the packaged solutions of Sberbank, their distinctive features, and difficulties in their implementation as well as financing in the non-packaged format and opportunities for the bank and the Housing and Public Utilities Fund to participate in a single project. During a session devoted to smart cities, experts spoke about the experience gained from using digital solutions in the municipal sector and municipal solid waste and noted the possible effects from them as well as how technologies will help optimize processes and save money for consumers and businesses.

During the Forum’s final discussion, the participants discussed the current state of the public utilities sector, events planned as part of Russia’s national projects, sources of funding for the industry, judicial practice, and smart technologies. Housing and Public Utilities Fund Deputy General Director Olga Serdyuk spoke about the Fund’s activities to provide financial support. She noted that it is essential to prevent a sharp increase in tariffs for the population when carrying out modernization and that this cannot be avoided without resources from the Fund. PPP Development Centre Executive Director Maxim Tkachenko said that when developing the utilities market, the problems that have accumulated in the industry cannot be passed on to the consumer through tariffs and that capital grants remain a key issue. Tkachenko noted that the PPP market in this industry has expanded ten-fold over the last ten years, but it is noteworthy that the number of new projects has been falling since 2016 while the average amount of investment has increased. Private investments dominate in the public utilities sector, as 9 kopecks of budget funds are provided for each rouble of private investment. Roman Sorokin, Deputy Director of the Housing and Public Utilities Department of the Russian Ministry of Construction, said that improvements should be made to infrastructure and the number of qualitative indicators concerning the permissible level of wear and tear should be determined and used as a basis instead of chasing after concessions.

The Forum also featured uniquely designed master classes on the financial structuring of public-private partnership projects and specific aspects of preparing and executing energy service contracts.