Mechel seeking wealth fund money for railway to Vanino Port - paper
MOSCOW. July 16 (Interfax) - The owner of steel and coal group Mechel , Igor Zyuzin is proposing that money from the National Welfare Fund (NWF) be allocated for the development of the railway infrastructure of private investors and not just that of Russian Railways (RZD) .
Zyuzin floated the idea Friday at a meeting with First Deputy Prime Minister Igor Shuvalov, national daily Kommersant reported on Tuesday, citing participants in the meeting. Shuvalov's office confirmed that the issue of providing NWF money to private companies was raised, and that the Finance Ministry and Economic Development Ministry have been ordered to work it out.
Mechel is prepared to develop a section of the Baikal-Amur Mainline (BAM) in the direction of the Vanino Port with resources from the NWF. Mechel bought the port in 2012.
The company has experience implementing railway projects, as it invested 40 billion rubles in the 321-km railway from its Elga coal field to the Ulak station on BAM, the paper said.
It was reported earlier that the Blagosostoyanie nongovernmental pension fund was prepared to provide 5 billion rubles for the development of the BAM section to Vanino. The pension fund could also get about a 25% stake in the port in a repo deal with companies controlled by Zyuzin.
The cost of the railway project is estimated at 40 billion-45 billion rubles and it could potentially pay for itself in 15-20 years.
NWF money is currently invested in the bonds of foreign countries and deposits at Vnesheconombank (VEB). But theoretically up to 30% of the fund's money can be invested in the bonds of companies with a credit rating of at least BBB- and up to 50% can be invested in the shares of publicly listed companies.
President Vladimir Putin said in June that 450 billion rubles from the NWF will be invested on a repayable basis in infrastructure projects - the construction of a high-speed railway between Moscow and Kazan, the Central Ring Road in Moscow Region and the modernization of the Trans-Siberian Railway.
However, almost immediately state aircraft, engine and shipbuilding corporations also laid claim to NWF money. Mechel is the first private company to openly raise the issue of getting financing from the NWF. Mechel declined to comment, the paper said.
The Economic Development Ministry confirmed that the "issue is at the stage of elaboration." A federal official who attended the meeting said that the mechanism for allocating NWF money to private companies should incorporate "protection from lobbying," misspending and other risks.
"It is assumed that this should be a transparent mechanism with strict requirements for recipients of the fund's resources. Perhaps there will be a requirement to present a detailed business plan, the structure of the whole business of the applicant for NWF funds will have to be shown, through what entities and where its cash flows go, including in the specific project," the paper quoted the official as saying.
Shuvalov "understands how great interest can be in spending NWF funds, so he wants to raise the bar of applicants' responsibility for the fund's resources as high as possible," the paper's source said. Therefore, it is "premature" to talk about private investors' active involvement in spending NWF money, he said. He cited the process for obtaining government guarantees during the crisis, when applicants went through commissions at the Economic Development Ministry and Finance Ministry, then Shuvalov and were then "turned inside out" by state lender VEB. "Not everyone will be prepared for this, even for cheap long money," the paper's source said.
Businessman Ruslan Baisarov, who plans to invest in a railway in Russia's Far East as part of the development of the Elegest coal field, supports Mechel's idea.
However, the paper reported a high-ranking source at RZD as saying that giving NWF money to Mechel "could be dangerous for the fund."
"This is at best a questionable idea, considering the company's debt burden," he said. Mechel's debt stood at $9.2 billion at the end of the first quarter of 2013. Furthermore, the ownership of Vanino, which Mechel bought from the government and then partially resold, remains murky.
RZD, meanwhile, has prepared a number of options for financing projects in the eastern part of the country, including without the involvement of NWF money, with 262 billion rubles in fund money and with 562 billion rubles, which is the full cost of projects to 2018. In addition, plans for 20-year soft loans at 6% interest and the NWF buying an equity stake in RZD have been discussed, the paper said.
