Interview with Ms. S.V. Ganeeva, Director, Investment Policy Department:
Concession Facility Not to Be Taken Away, The Business, No. 151, 16.08.2005, page 5

Concession Facility Not to Be Taken Away

Oksana Karpova

Business, No. 151, 16.08.2005, page 5

Ms. Svetlana Ganeeva, Director, Investment Policy Department, MEDT, on investors’ participation in concession projects

A number of Russian and foreign companies have already expressed their wish to put up money into projects to be implemented on the basis of concession agreements. Ms. Svetlana Ganeeva, Director, Investment Policy Department, Ministry for Economic Development and Trade, told The Business correspondent Oksana Karpova about the conditions, which investors’ bids should meet to become eligible.

- Are there any concession projects into which investors are willing to put up money?

- Yes, these projects are being discussed by Russian and foreign companies. However, it would be premature to speak about something particular. Yet all of the concession agreements will be concluded on a tender basis, and a separate governmental or presidential decision will be made for each federal facility, if it is a facility of strategic importance. That’s why it is difficult to designate any specific number of projects to be implemented in the near future.

The idea is that in October MEDT will submit draft standard concession agreements based on which actual agreements are to be concluded later, to the government. These are most likely to be transport and housing/utilities projects, first and foremost.

- What drew the investors’ attention to these particular fields?

- The fact is that these are the fields investment conditions for which have been virtually finalized. Companies should have a clear idea of conditions upon which they will be able to put up their money into any particular concession projects and what guarantees the state is ready to provide.

- And what are the conditions of tenders?

- Individual requirements to investors will be determined for each particular project, that is to say, an exhaustive  list of parameters that should be achieved in fulfilling any given socially significant goals will be presented. For instance, if road construction is concerned,  traffic capacity will be fixed, requirements to road quality will be made etc. If an investor believes it will be able to properly implement this project it will have the right to participate in the tender.

In its turn, the state will guarantee to an investor that a facility transferred into concession will not be taken away later.

- Initially a concession bill provided for project implementation periods, from seven to 99 years.  Later on, these ‘timeframes’ were deleted.  What will be the range for the periods of execution of a concession agreement?

- This will be determined on a case-by-case basis.  A period will be prescribed in a concession agreement depending on the time when a facility was created or reconstructed, the scope of investments, the project payback period, and different liabilities of a concessionary.

- May concession agreements be revised?

- Of course, contractual conditions may be amended by agreement between the parties but normally this should not affect conditions determined on a tender basis. The only exceptions are cases when any changes that impair a concessionary’s situation (e.g. in law or regulated rates) occurred. Then the appropriate compensatory conditions are incorporated into the agreement.

- What threats exist for investors that, supposedly, won a tender, put up certain funds into a project but decided to give up its implementation later for some reason?

- If a desire to abandon an agreement comes up prior to expiry of its effective period and discharge of the concessionary’s key obligations and, consequently, does not meet the assignor’s interests, it may only be terminated by a court judgment. If an investor’s obligations have been discharged a concession agreement will terminate upon agreement between the parties.

- Will establishment of an investment fund accelerate the launch of the concession arrangements?

- This matter is under discussion now. We plan to allocate funds from the investment fund,  including for drafting feasibility studies under concession projects.  That is to say, documents will be drawn up for those facilities that will be subsequently put to tender in order to find investors that will be the most profitable for the state.

- Will there be room for small businesses in concession projects?

- The law does not envisage any ban for small businesses.

However, there is another problem, in my opinion. Russian small business is micro business, and for companies to be able to participate in concession projects, one should extend the delimitation of the notion of small business, in particular, as concerns the number of employees and turnover in a company.

- It often happens that no sooner has a new law taken effect than they start drafting an array of revisions to it. Is MEDT going to adjust the concession law?

- I think corrections will be made but in some time, no earlier than in 12 to 18 months. That is to say, when practical experience will be available and it is clear what adaptations are necessary.