Russia to build up oil deliveries to China by railway

The Russian Railways Joint Stock Company plans to invest 12 billion rubles (1$ equals 29 rubles) in the project of oil deliveries to China, the company's vice-president Galina Kraft told a press conference this Wednesday.

"The project's recoupment period is six years, with the average recoupment period of 10-12 years," she said.

Galina Kraft further said the company had opted for a project-based investment process.

The comprehensive investment project of oil deliveries to China was the first business plan worked out by the Russian Railways as part of its efforts to switch to project financing. This project took into account the interests of both the infrastructure owner and user.

According to data of the Russian Railways, out of the total sum of 12 billion rubles, the company will spend 2.2 billion rubles in 2004, 4.6 billion rubles in 2005, 4 billion rubles in 2006 and 1.1 billion rubles in 2007 on the project.

The business plan stipulates the railway-based oil deliveries along two main routes. The first route extends from the Sukhovskaya railway station to the Naushki station (by transit through Mongolia to China) with the maximum carriage volume of 5 million tons of oil in 2006 (3.3 million tons more as compared to 2003). The second route will involve carriage from the Sukhovskaya station to the Zabaikalsk station with the maximum carriage volume of 10 million tons in 2006 (8.5 million tons more than in 2003).

Galina Kraft further noted that the Russian Railways intended to attract no less than 12 billion rubles in 2004 and 17 billion rubles in 2005 through leasing.

As she went on to say, the company's leasing program last year had the target of 10 billion rubles but in actual fact the company attracted only 5.5 billion through leasing. She explained this figure by the fact that Uralvagonzavod, the main supplier of railway cars, failed to provide modern hardware.

"The company uses the leasing mechanism to make up for its inability to finance the purchase of the rolling stock in requisite amounts. Therefore, only additional funds to be attracted by the Russian Railways can help the company to modernize its rolling stock," Galina Kraft said.

She further said that in compliance with the company's strategic development program until 2010, its investment requirements would equal 1,800 billion rubles, with attracted funds amounting to about 300 billion rubles.

According to the company's vice-president, this year, as in the past year, leasing companies will be selected on a competitive basis.

The Russian Railways Joint Stock Company has already announced two public tenders scheduled for July 2 and July 15 for the lease of 4,600 freight open box cars worth about 5 billion rubles and 191 passenger cars worth 3 billion rubles, Ms Kraft said.

She noted that this year the minimal leasing term was limited to seven years and financing rates were expected to range from 12.5% to 13% of annual interest, including the fees of leasing companies.