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On November 27, 2014, the Transport Ministry Investment Coordination Council’s** Taskforce on Extending the Moscow Air Hub (MAH) Experience to Regional Airports* led by VEGAS LEX Partner Albert Eganyan, chairman of the InfraONE Board of Directors, held its first meeting.

The Transport Ministry Coordination Council on Investment decided to set up a taskforce on the project after its first meeting in July 2014.

The taskforce discussed two key issues:

1.     Concession is a resource for attracting investment into regional airports’ development

2.     Preliminary discussion of strategic and hands-on aspects of regional hubs’ development

According to the participants’ estimates, projected investment in the regional airports’ development at the 2030 time horizon will total RUB 1.4 bln. Government financing deficit will run at around 30% even without the potential macroeconomic indicators’ decline in the next few years. Therefore, regional airports will be facing a need for funding arrangements such as private investment.

The speakers laid out the rationale for using the concession model in the MAH project as well as the advantages that concession can give to the current lease-based airport development model. The experience of structuring the MAH airports has shown that concession can ensure longterm investment support for the airfield and air terminal infrastructure development, increasing the private investor’s assets’ capitalization and significantly lowering the cost of non-government financing.

One of the most promising non-government investment instruments under consideration was issuing specialized project finance vehicle bonds. These can be used as part of the concession arrangement alongside government financing instruments such as capital grants, subsidized bank interest and longterm tariff regulation.

Head of the VEGAS LEX Aviation and Airport Development Group, was among the key speakers at the meeting.

The meeting was attended by representatives of regional transport ministries and departments, regional airports, as well as major banks. The participants represented the Kaliningrad Region Ministry for Infrastructure Development, the Omsk Region Mission at the Russian Government, the Ministry for Transport and Roads of the Republic of Sakha (Yakutia), the Khabarovsk Territory Ministry for Industry and Transport, the Regional Airports asset management company, the federal state unitary enterprise Civilian Airports Administration, Mineralnye Vody International Airport, Arkhangelsk Airport, Kazan International Airport, Basil Element, Vnesheconombank, Gazprombank, VTB Capital and other banks.

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*In compliance with the No. 46 protocol of the first meeting of the Transport Ministry Coordination Council on Investment of July 16, 2014.  

** In accordance with Appendix 2 to the Russian Transport Ministry Order No. 225 of June 27, 2013, the Coordination Council on Investment is a permanent consultative body coordinating the activity of federal executive authorities and businesses aimed at attracting private investment for the transport infrastructure development and at the preparation and implementation of major investment projects in the sphere of transport and infrastructure involving public-private partnership and other forms of non-government investment.

For more information on VEGAS LEX’s aviation and airport development services click here.