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30 Nov

Svetlana Ganeeva: Moscow Is Developing through Investors

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Six months ago, Svetlana Ganeeva headed the Moscow City Investment Agency. The CEO told about the first results of work and the introduction of new inaction formats between Moscow and business in her interview to RIA Novosti.

Светлана Ганеева

- Svetlana, you already headed the Moscow City Investment Agency from 2012 to 2014. Then you went back in 2020. What has changed in five years?

- More than five years ago, my colleagues and I at the Moscow City Investment Agency were preparing the very first public-private partnership projects in Moscow. We structured the first life cycle contracts and transfer hub projects, developed the RUB 1 Per Square Meter rent program with investment commitments, and participated in creating the legal framework to implement concessions and PPPs.

Today, I am pleased to see that the fruits of our work are demanded by the city: in a few years, the public-private partnership made a huge step forward. Today, Moscow actively involves business in solving city-wide problems in areas traditionally funded from the city budget. The city is growing and developing through investors: many Moscow buildings have been reconstructed, the metro is using cars purchased under life-cycle contracts, new modern production facilities are being built.

- What formats of interaction with business you were directly implementing do you consider to be the most promising ones?

- All PPP mechanisms are effective and useful, a specificmodel is chosen depending on goals and objectives of every single project. In my opinion, one of the most promising interaction formats between business and the city is concession. It provides an opportunity to develop the socially significant urban infrastructure through investor. In this case, the city receives a running facility with a title to it, and the business receives revenues from services to be provided for a certain period of time. Today, the investments under Moscow concession agreements amount to RUB 60.2 bn.

The project for construction and operation of the Kutuzovsky Avenue Northern Relief Road is being implemented under concession. The tender for the right to conclude the largest concession agreement in Moscow was prepared and held several years ago - during my first term as CEO of the Moscow City Investment Agency. Private investments in this project amount to about RUB 50 bn. The concession agreement is concluded with the investor for 40 years.

- What other concession agreements were concluded? What's in them for the city?

- At the end of the last year, Moscow concluded a 25-year concession agreement on construction and operation of the 2.3-km cable between  the Skhodnenskaya and Rechnoy Vokzal metro stations.

The investor will put RUR 3.16 bn in the project implementation. The cableway will allow to unload streets and roads and to reduce the travel time between two Moscow districts from 45 down to 7 minutes. I’d like to point out that it won’t be a tourist attraction, but a new mode of transport: it will be integrated into the city transport network.

- The mentioned concessions are in the transport sector. Are you considering any other industries to extend this type of investor partnership?

- Of course, we are. In spring 2021, we plan to enter into a concession agreement on construction and operation of two green sludge processing plants in South-East Moscow. This will be the first Moscow concession in housing and utilities.

Stage 2 of the open tender is currently running, it will determine the concession holder Moscow will conclude a 20-year concession agreement with. Two modern plants for green wastewater treatment will appear in South-East Moscow, the investor shall build them within three years and operate within the next 17 years. The investments in the new plants will exceed RUB 25 bn.

Another concession project, which may start next year, is in the social area. This is the construction of a gerontological center in West Moscow. The investments in creation and equipping of the boarding house will amount to about RUB 500 m. Senior Group PM is bidding for the concession right: the company will submit its offer for consideration in the near future.

- Concession is a classic PPP form. Do you use any non-trivial formats to attract investors?

- For example, Moscow was the first in Russia in using offset contract as a format of interaction with business. This is the state purchase of goods with counter investment obligations to localize production. One of its main objectives is to encourage businesses to invest in new production facilities or to upgrade the existing ones. The minimum investments for an offset contract is RUB 1 bn, and the maximum contract time is 10 years.

- How many of these contracts and in what industries did Moscow conclude?

- The Russian capital concluded four offset contracts. The total volume of private investments in offset contracts amounts to RUB 11.9 bn, the volume of purchases - to RUB 71.6 bn.

Moscow concluded its first two offset contracts in pharma. The investors will invest within this contracts a total of RUB 8.8 bn in the localization of modern pharmaceutical production facilities. Biocad already commissioned stage 1 of the plant in the Technopolis Moscow SEZ, R-Opra received a construction permit. Gemamed, the third offset contract holder, will set up a medical products plant in the city, the investments will amount to RUB 1 bn. The subject of the fourth offset contract concluded this year with Wimm-Bill-Dann was baby food for the city dairy distribution points; the project investments amounted to RUB 2.1 billion.

- Are you planning to conclude more contracts?

- The tender for the fifth offset contract is currently underway. The winner will be awarded an 10-year offset contract. Under its terms, the investor shall localize production of 20 drugs in Moscow within two years. The planned investments will amount to RUB 1 bn.

By the way, another non-trivial form of interaction between Moscow and investors is life cycle contracts. They provide for the delivery of goods with further maintenance and repair by the supplier within a certain period of time. The city gets through the long-term LCC nature the best value for money for the equipment and related maintenance, and can evenly and predictably allocate its costs. On the other side, the investor receives a long-term capacity utilization and the opportunity of guaranteed (in case of good faith fulfillment of obligations) revenue during the entire contract time.

- In what areas do you apply LLCs?

- The biggest volume is in transport: Moscow concluded the LCCs worth almost RUB 452 bn for the supply and maintenance of metro cars, new generation low-floor buses, low-floor three-section trams, and electric buses.

Last year, we were the first to apply this mechanism in the housing and utilities: the city concluded a contract for the supply of heat metering units (33,500+ units) worth RUB 31.6 bn, the contract time is 12 years.

In health cate, Moscow purchased sophisticated equipment for RUB 37.9 bn. World's leading manufacturers are among the tender winners: Philips, Siemens, Canon, GE.

The cumulative volume of Moscow LCCs in transport, healthcare, housing and utilities is currently RUB 521.4 bn.