Market participants asked the Ministry to intervene in the dispute on concessions

Photo: Mikhail Japaridze / TASS

FAS proposes to amend the law on concessions, opening access to trading for all investors and eliminating one hundred percent reimbursement of the concessionaire from the state budget. Some market participants saw this as a threat to major infrastructure projects

The mediator in the dispute

The parties to the concession market, opposed to initiated by the Federal Antimonopoly service (FAS) amendments to the law on concessions, decided to appeal to the Ministry of economic development, told RBC participants in closed meetings of the Infrastructure of the club, held last week (copy of the final resolution is at the RBC).

FAS currently opposes the reimbursement by the government 100% of costs to a private investor (the concessionaire), as well as demands to exclude “non-transparent and readministered requirements” of the bidding procedures for conclusion of concession agreements. According to the Ministry, this will ensure equal accessibility to all potential participants. FAS has already blocked one major road project because the concessionaire was to receive one hundred percent compensation of their expenses from the budget.

According to some market participants, the proposals of the FAS jeopardize the implementation of major infrastructure projects in the country, including in the format of public-private partnership (PPP). In fact, the FAS proposes to equate the concession agreement for public procurement, regulated by the Federal law 44, says the head of the Russian practice of infrastructure and PPP projects, Herbert Smith Freehills Olga Revzina. “FAS questioned the possibility [of the organizer of trades] set requirements such as financial viability, experience of attracting funding, trying to disable the ability to confirm the member experience with the help of a third party,” she said.

According to Deputy head FAS of We Petrosian, this step is necessary to ensure businesses have equal access to participation in tenders. “The tendering process in the current law on concessions requires improvement, in particular, exclude the possibility to present readministered requirements to participants of competitions, for example, to have experience of financing, whose illegality is confirmed by the court,” he explained. Existing legislation gaps lead to the fact that often the conditions of bidding for a concession is formulated for a specific participant, explains Petrosyan. FAS representative also noted that the previous Finance experience is not indicative of the presence of a member of sufficient funds at the time of bidding. Revzin suggests that the changing requirements can lead to the fact that in competitions will participate by unscrupulous participants, who are unable to implement these projects.

FAS also proposes to establish the law on concession agreements minimum size of the share of project financing by a private investor. According to authorities, a state shall compensate the concessionaire all of the invested funds. According to Petrosyan, under current law, the government may assume part of the cost of the concession agreement, but the financial responsibility should be borne by the private investor. As noted by Revzin, in this case to find a concessionaire for large projects would be virtually impossible.

“The concession provides either one hundred percent financing of contract on the part of investor, either mutual funds investor (concessionaire) and the government body (the grantor), in other words co-financing. But not one hundred percent financing from the state”, — explained RBC representative office.

An employee of the company “Avtodor”, which acts as the customer of a major concession projects, declined to comment. “The Bank’s representatives participate in the discussion and join in the decision after the meeting”, — have informed RBC in the press service of the Eurasian development Bank.

Blocked the road

In January 2017, the Federal Antimonopoly service canceled the results of the competition for the construction of a toll highway Sterlitamak — Magnitogorsk.

The tender for the construction of the road, which should relieve M5 “Ural” and the route Europe — Western China, was held in late 2016. To participate in the competition was allowed five companies, the winner was “Bashkirdistan”. It was assumed that 20 billion rubles for the project will come from the Federal budget 4.5 billion rubles from the region of 5.8 billion rubles from private investors. Some areas on the road were supposed to pay. According to the results of work performed the state had to pay the concessionaire about 12.9 billion rubles.

Having considered the complaint of one of participants of competition — the company “the South Ural management of highways”, Federal Antimonopoly service decided to annul the results of the competition, since the costs for works have been fully covered by the budget. “The budget of the Republic of Bashkortostan in the next 15 years would have amounted to in this case, about 22 billion rubles”, — stated in the message Department. According to FAS, the tender for the construction of the road Sterlitamak — Magnitogorsk was actually a government purchase of works on construction of bypass procedures of the state order.

“Bashkirdistan” and the Committee of Bashkortostan Republic on transport and road facilities appealed the decision of the FAS in the Moscow Arbitration court. A preliminary hearing was held on March 3, it follows from the records of the court. The next meeting is scheduled for April 7.

According to Olga Revzina, a negative decision by the Bashkir project will create risks for future projects and will jeopardize existing projects. Revzin believes that if the proposals of the FAS in terms of payment of the grantor will be approved, the check may face and the “Plato”. “During inspections can be identified claim involving the agreement, but rather with the execution of projects,” she adds.

The head of FAS Igor Artemyev at the beginning of March said, reported TASS news Agency that the concession in which the concessionaire does not bear the investment burden, but receives compensation from the budget are illegal. The regulator will pursue and suppress these forms of fraud, warned Artemyev.

After that, the Ministry of economic development made a statement on inadmissibility of decision-making that undermines the stability of the institution of public-private partnerships, told TASS.