Case Studies: Western High-Speed Diameter (WHSD), Russian Federation

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Project Overview
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Figure 1: Figure 1: Western High-Speed Diameter toll road
Western High-Speed Diameter (WHSD), Russian Federation
Project Type: Greenfield
Type of Project Financing: Public-Private Partnership (PPP) BOOT
Contract duration: 30 years
Budget: 120 bln. Rubles
Project Time Line
7 February 2011: Call for tender
9 August 2011: Procurement process concluded
23 December 2011: LLC “Northern Capital Highway”, OJSC “Western High-Speed Diameter” and the Government of St. Petersburg sighed the PPP agreement
20 December 2012: Financial close and renewed PPP agreement were signed in Mosco
March 2013: Start of construction
2016: Expected start of operation

Introduction

The Western High-Speed Diameter (WHSD), the first urban high-speed toll road in the Russian Federation, is a modern high-speed urban highway being built in St. Petersburg. The investment project of international significance is aimed at:

  • providing the transport connection between the north-western, the central and southern parts of the city;
  • solving the problem of transport isolation of the Vasilievsky Island from other parts of St. Petersburg, including the period when the existing road bridges are open;
  • relieving the transport road network of St. Petersburg, including the central part of the city being under UNESCO protection;
  • improving the environmental conditions in St. Petersburg by relieving the city roads;
  • partially solving seasonable road congestion problems at the exit from the city to recreational areas;
  • transferring the transit traffic flows to the new highway, that will significantly increase the capacity of the road network of the city, relieve transport congestion in the historic centre of St. Petersburg and improve the environmental conditions;
  • increase of turnover of the Seaport of St. Petersburg.

The project realization determines:

  • the dynamics of socio-economic development of the city;
  • competitiveness;
  • the investment attractiveness of Saint-Petersburg;

The Contract was signed between the City of St. Petersburg, OJSC “Western High-Speed Diameter” and “Northern Capital Highway” on the 23th of December, 2011, in accordance with St. Petersburg Regional Law № 627-100 “On Participation of St. Petersburg in Public-Private Partnerships”.

The object of the PPP project is the toll road “Western High-Speed Diameter” (hereinafter – Toll Road), which includes three parts:

  • North part;
  • Central part;
  • South part.

The Toll Road Technical Parameters are:

  • Length : 46,6 km
  • On land : 19,3 km
  • In an open cut : 2,7 km
  • On engineering structures :24,6 km
  • Number of transport interchanges :15
  • Number of lanes : 4-8
  • Maximum permissible speed :110 km/hour

The Contracting Authority (Public Party)

St. Petersburg and OJSC “Western High-Speed Diameter” appear as a public partner in the project. The former is the initiator of the project and the owner of the object after the completion of the PPP agreement.

Under the PPP Agreement, the city Government is obliged to provide the land to the private partner, fulfil preconstruction works, such as rerouting or removal of the existing engineering networks, territory cleaning and carrying out measures for protection of the environment, provide capital grant for private partner, lease out the object of agreement for a long-term and provide minimal guaranteed income and compensation in case of cancellation of the agreement.

OJSC “Western High-Speed Diameter” is responsible for organization of the tender and acts on behalf of the city.

The Concessioner (Private Party)

The Limited liability company “Northern Capital Highway” (NCH) is a SPV company created on March, 14th 2011 on the purpose of realization of the PPP project initiated by the city government. The consortium consists of VTB Capital, Gazprom Bank, Astaldi (Italy), IçtaşInşaat (Turkey) (construction contractors) and Mega YapiInşsaatve Ticaret (Turkey) as a technical consultant.

NCH is obliged to finance, build the Central part of the highway and operate the highway for 30 years.

Debt funding equals 49% of the total funding and is provided by the group of different financial organizations such as commercial (investment) banks (VTB Capital, Gazprombank – 28%), international financial organizations (EBRR, Eurasian Development Bank – 30%) and development institutions (Vnesheconombank – 42%). Equity financing is 7%.

Users

WHSD is a toll road aimed at relieving the city road network by increasing its traffic capacity by up to 120 000 vehicles per day and provide the transport connection between the north-western, the central and southern regions of the city.

The major users of the highway are citizens and visitors of the city who drive motor cars, bus drivers and truck transport. The vehicles are divided into four categories according to their size. Toll charges differ between categories and depend on traffic and time of day. Also, there is a discount system for frequent users (10%, 15% or 20%).

There are three payment options:

1. Transponder

The most convenient way to pay a fee as drivers are charged automatically with the help of the electronic gadget placed on the wind screen. The use of transponder allows the user to get the discount of 25% or 15% depending on the chosen tariff.

2. Contactless smart card

The smart-card can be either personalized or not, topped up online.

3. Cash or credit card

Key Purpose for PPP Model Selection

The contract was signed between the Government of St. Petersburg, ZSD and the SPV NCH in accordance with St. Petersburg Regional Law on PPP. ZSD Company takes part as it was already responsible for constructing the North and South parts of the highway. It represents the city interests in the scheme. The purpose of the Agreement is, firstly, to raise money that are not public, secondly, to construct the object and, thirdly, operate it. These functions that were addressed to private partner defined the model of BOOT.

Project Timing

The key city`s reasons for project initiation are the lack of transport provision of the city and the need of relieving the transport road network. From the city government’s perspective, this will boost socio-economic development of the city, increase competitiveness and investment attractiveness.

Project Locality and Market Geography

The total length of the highway is 46.6 km. The Central part, which is being constructed under the PPP Agreement, is of 11 km length. The road goes from the river Ekateringofka bank to the right bank of the river Big Nevka.

From the city economic prospective, the highway allows the increase of cargo turn-over by improving the access to the port, improves transport accessibility to seaport passengers, boosts traffic capacity up to 120 000 vehicles per day, ultimately enhancing the city development as a touristic centre, providing workplaces and improving economic activity of the population.

On the federal level, the highway becomes a part of the transport corridor “North-South” by increasing traffic capacity, improving the level of federal indicator of physical distribution system effectiveness and providing conditions for increasing population mobility.

Procurement & Contractual Structure

Tendering

The tender organizer:

  • OJSC “Western High-Speed Diameter”

The participants of the tender:

a) Ltd. “Baltic Concession Company “Magistral”

The Parties of the Consortium are:

⇒ CJSC “Terra Nova” (Russia)
⇒ CJSC “Baltic Dredging” (Russia)
⇒ AllgemeineBaugesellschaft A. PORR AG (Austria)
⇒ Renaissance Construction Ltd. (Russia)
⇒ Vinci Concessions SAS (France)
⇒ JSC “Bridge Construction N19” (Russia)
⇒ Jan de NulNV (Belgium)
⇒ LTD “Sberbank Investments”(Russia)

b) Limited Liability Company “Northern Capital Highway” (NCH)

The Parties of the Consortium are:

⇒ VTB Capital (Russia)
⇒ Gazprombank (Russia)
⇒ Astaldi (Italy)
⇒ IçtaşInşaat (Turkey)
⇒ Mega Yapi Inşsaat ve Ticaret (Turkey)

c) Samsung C&T Corporation(South Korea)

Planned schedule of PPP tender:

07.02.2011 – publication of the notice about the tender 29.03.2011 - filing of applications for prequalification 12.04.2011 – prequalification stage 28.06.2011 – submission of tender proposals 29.07.2011 – assessment of tender proposals and determination of the winner of the tender 30.09.2011 - conduct of negotiations 20.12.2011 – signing of the PPP agreement

The requirements of prequalification:

I. Experience in construction of a toll road, the operation of which is started not earlier than 2000;

II. Experience in construction of a toll road in the framework of a project, which meets the following requirements:

  • The project cost – not less than 10 billion rubles
  • The length of the span of the bridge - not less than 160 m., the length of the vertical clearance - not less than 25 m.

III. Experience in attraction of funding not secured by state guarantees in the last 10 years for the project, the cost of which is not less than 10 billion rubles. The amount of attracted funding – not less than 7 billion rubles.

IV. Experience in participation in PPP projects, the total cost of which is not less than 10 billion rubles.

The proposals of the participants during the tender procedure were evaluated on the following criteria:

  • Financial criteria. weight – 80%
  • Legal criteria – weight 20%

Contract Structure

The three-party contract was signed between the city of Saint Petersburg, ZSD and CHN. The property rights on the road belong to ZSD. CHN possesses all the profits it gains from the operation of the road.

The St. Petersburg responsibilities are:

  • To lease the land necessary for the construction to ZSD;
  • To ensure the compliance of preconstruction works done in accordance with project documentation such as rerouting of utilities and facilities and of territory preparation including vacation of the land, compensatory payments and natural environment protection;
  • Provide budget money according to the legislation in the manner and on the terms defined in the Agreement and in compliance with the project indicators including the amount of profits obtained from user charging;
  • To pay an indemnity in amounts, manner and terms defined in the Agreement;
  • To support the Agreement parties within its powers and according to the Agreement.

The ZSD responsibilities are:

  • To build the North and South part of the highway;
  • To operate the object of the Agreement on terms defined in the Agreement;
  • To provide the NCH with an opportunity to operate in accordance with the Agreement on the land for building the Central part of the highway;
  • To provide the right of use of project documentation to NCH;
  • To finance a part of NCH spending on building of the object in amounts, manner and on terms defined in the Agreement;
  • To make payments to NCH on operation stage in amounts and manner defined in the Agreement according to the tender proposal in order to provide service of money raised by the NCH
  • To control the performance of NCH and make decisions on current project issues where necessary;
  • To support the Agreement parties within its powers and according to the Agreement.

The NCH responsibilities are:

  • To build the Central part of the highway;
  • To raise money in amounts enough to meet commitment;
  • To operate the road together with ZSD according to the terms of the Agreement.

The Private Partner is responsible for operating the highway and tolling. The fee is defined by the Private Partner within the limits set by the Public Partner. The agreement used by two parties is the scheme of minimal guaranteed income so that the city government represented as OAO “ZSD” is obliged to make fixed payments to the Private Partner as a guarantee of minimal income. In case of short delivery due to decrease in traffic level compared to forecasted, the city compensates the losses. In case of excess profits, the sum is divided between the Public and Private Partners in proportion of 90%/10%, correspondingly, according to the Agreement.

Risk Allocation

Saint Petersburg assumes:

  • Risk of not obtaining the licenses in case of illegal delay of releasing licenses and illegal cancellation of the authorization;
  • Risk of negative changes of legislation on cases defined in the Agreement.

ZSD assumes:

  • Risk of drawbacks of the project documentation;
  • Risk of delay of commissioning the Central part of the highway

NCH assumes:

  • Financing risks;
  • Common risk of getting licenses;
  • Common construction risks including risks of construction organization, price and delays of construction;
  • Operation risk including the risk of partial and total inaccessibility of the object of Agreement for users is distributed between ZSD and NCH.

Risk allocation is depicted in Figure 2.

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Figure 2: Risk allocation

Performance

The project is still under the construction stage and will be delivered by 2016. There are no delays so far.

References