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Investment activities

Investment programme approaches

The Company’s investment programme All the investment projects have consideration the financial aftermaths is designed to: commercial and budget efficiency for the investment project owner assuming ›› ensure uninterrupted transportation estimates in place and are ranked using that such owner fully covers the project service; the cost/benefit analysis. costs and reaps all of its benefits. ›› embrace the most promising projects in terms of both commercial and budget The projects’ commercial efficiency is With a payback period of up to 20 years efficiency; assessed based on the net cash flow and an IRR of at least 10%, an investment ›› minimise federal government spending from investing and operating activities, project is deemed to be sufficiently on investment projects. with the resulting estimates taking into efficient.

Investment highlights in 2018

Russian Railways’ Investment Programme Out of total investment spending, ACTUAL EXPENSES UNDER RUSSIAN for 2018 was approved by the Company’s RUB 162.8 bn was allocated to support RAILWAYS’ INVESTMENT PROGRAMME Board of Directors (Minutes No. 4 dated projects implemented in pursuance TOTALLED 20 November 2018). of instructions of the President RUB and the Government of , and Target volume of the Company’s the remaining RUB 367.2 bn was investment programme in 2018 was earmarked for the 530 RUB 547.4 bn, with the actual programme projects. bn costs amounting to RUB 530 bn (including RUB 14.6 bn in capitalised interest). The The Company’s investment programme investment expenses included: has seven key focus areas: ›› RUB 460.4 bn using the Company’s own ›› projects implemented in pursuance of cash; instructions of the President and the ›› RUB 66.7 bn in government support; Government of Russia; ›› RUB 2.9 bn raised to add certain non- ›› rail infrastructure development projects; public infrastructure assets to the ›› safety enhancement initiatives; infrastructure portfolio of Russian ›› infrastructure debottlenecking; Railways. ›› projects to enhance transportation accessibility; ›› rolling stock renewal initiatives; ›› other projects.

Russian Railways Performance overview Sustainable development Corporate governance Appendices

Projects implemented in pursuance of instructions of the President and the Government of Russia

Those are comprehensive infrastructure projects financed by both Russian Railways and the federal government and governments of Russian regions.

Development of the Central Transport Hub Development and renovation launch of the Dzheb–Shchetinkino section of the rail infrastructure serving ports of the second Dzhebsky Tunnel. After In 2018, the investment expenses of the and Black Seas commissioning of the adjacent second amounted to RUB 50.1 bn (including track on the Dzheb–Shchetinkino section RUB 16.2 bn allocated by the federal In 2018, the investment expenses the throughput capacity of the Kuragino– government). amounted to RUB 39.9 bn (including Sayanskaya section in 2019 will increase RUB 21.7 bn allocated by the federal to 37 train pairs per day (up 6 train pairs). The Central Transport Hub is designed government). to ensure transport accessibility against Construction of the Moscow–Kazan the expected rise in passenger traffic, In 2018, 90.7 km of second tracks were High-Speed Railway reduce overall travel times and improve constructed. As planned, freight volumes the passenger experience. It will help transported to the ports of the Azov and In 2018, the investment expenses decrease traffic density on the highways, Black Seas totalled 84 mt. amounted to RUB 1.9 bn, (including subway and key stations of Moscow RUB 0.1 bn allocated by the federal and the Moscow Region, while also Development and renovation of the rail government). improving the quality of services (including infrastructure serving ports of the North- for passengers with reduced mobility). Western basin In 2018, the design and cost estimates and engineering surveys for the project The first stage of the Moscow Central In 2018, the investment expenses were completed, with Russia’s State Diameters project was launched, covering amounted to RUB 15.5 bn. Expert Review Board giving a green light the routes from Odintsovo to Lobnya for the Vladimir–Nizhny Novgorod section. (MCD 1) and from Nakhabino to Podolsk Authorised train mass metrics were (MCD 2). successfully increased in 2018, with Construction of the Prokhorovka– the carrying capacity of the operating Zhuravka–Chertkovo–Bataysk line (new rail Upgrade of rail infrastructure of the domain’s infrastructure rising to 147 mtpa line on the Zhuravka–Millerovo route) Baikal–Amur and Trans-Siberian main lines (up 9 mtpa y-o-y) thanks to the deployment designed to enhance the throughput and of heavy-duty trains. The throughput In 2018, the investment expenses carrying capacity of the railways capacity reached 120 pairs of trains per amounted to RUB 1.7 bn. day (up 5 train pairs y-o-y). In 2018, the investment expenses In 2017, the Company completed amounted to RUB 48.5 bn. Comprehensive development of the construction of the two-track electrified Railway’s Mezhdurechensk– Zhuravka–Millerovo line (137.5 km), with The project seeks to boost freight Tayshet section the line put into operation on a permanent transportation volumes from the key basis. mineral deposits of the Eastern Operating In 2018, the investment expenses Domain by removing infrastructure amounted to RUB 3.7 bn, (including 2018 saw the issuance of preliminary constraints on the Baikal–Amur and Trans- RUB 2.5 bn allocated by the federal permits. Siberian Railways. Implementation of this government). project will help increase the carrying capacity of the main lines to 180 mt 2018 saw commissioning of even-numbered by 2024 and 210 mt by 2025. tracks at the Ilanskaya Station and

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Construction of a western bypass at the Infrastructure expansion and upgrade on To that end, a concession agreement was Saratov Transport Hub of the Privolzhskaya the Severnaya and Sverdlovskaya Railways signed between the Federal Agency for Rail Railway with the expansion of the allowing for additional cargo traffic as part of Transport (Roszheldor) and SShKh in 2018. Lipovsky–Kurdyum section the Northern Latitudinal Railway project

In 2018, the investment expenses In 2018, the investment expenses amounted to RUB 0.9 bn. amounted to RUB 0.6 bn.

The main aim of this project is to expand The project aims to put INVESTMENT EXPENSES UNDER the railway infrastructure with a view in place a latitudinal railway connecting PROJECTS IMPLEMENTED to enhancing the carrying capacity the Severnaya and Sverdlovskaya Railways IN PURSUANCE OF INSTRUCTIONS on the approaches to the Saratov as an essential element in the Arctic OF THE PRESIDENT AND Transport Hub and increasing freight Transport System and associated THE GOVERNMENT OF RUSSIA volumes by at least 49.2 mt compared infrastructure. The project will help reduce TOTALLED to 2015. This initiative is designed the length of transportation routes linking RUB to complement the Development and mineral deposits in the northern part Renovation of the Rail Infrastructure of West to the ports of the Baltic, Serving Ports of the Azov and Black White, Barents and Kara Seas and 162.8 Seas project. In 2018, drafting of design thereby contribute to the development bn in 2018 documents was underway. of the Russian Arctic.

Rail infrastructure development projects

Those are priority projects requiring (adjustments required for passenger ›› RUB 0.1 bn for the reconstruction of the accelerated financing to ensure planned transportation); Morozovskaya–Volgodonskaya section of freight and passenger transportation ›› RUB 0.9 bn for the throughput increase the North Railway volumes. In 2018, expenses under these on the Artyshta–Mezhdurechensk– projects were as follows: Tayshet section; INVESTMENT EXPENSES UNDER RAIL ›› RUB 2.1 bn for upgrade of the Baikal– ›› RUB 1 bn for the construction of the INFRASTRUCTURE DEVELOPMENT Amur and Trans-Siberian Railways (Stage Selikhin–Nysh railway line with a passage PROJECTS TOTALLED 2); across the Nevelsky Strait; RUB ›› RUB 0.7 bn for electrification of the ›› RUB 0.2 bn for the development of the Rtishchevo–Kochetovka section; Perm–Solikamsk connection; ›› RUB 0.7 bn for electrification of the ›› RUB 0.1 bn for the development of the 5.9 Ozherelye–Uzlovaya–Yelets section Perm Railway Hub and the construction bn in 2018 of a river crossing;

Safety enhancement initiatives

As part of the Transportation Safety As part of the Transport Safety INVESTMENT EXPENSES UNDER investment project, the Company of Infrastructure Projects initiative, SAFETY ENHANCEMENT INITIATIVES implemented a set of initiatives Russian Railways completed engineering TOTALLED in the run-up to the 2018 FIFA World surveys for infrastructural development RUB Cup and the 2019 Winter Universiade in restricted areas involving installation in Krasnoyarsk. of transport safety equipment at four bridges on a railway route bypassing 92.8 Ukraine and five facilities on a route bn in 2018 bypassing .

Russian Railways Performance overview Sustainable development Corporate governance Appendices

Infrastructure debottlenecking

This category includes projects to: In 2018, the following pieces of The project aims to ensure ›› construct second tracks; infrastructure were put into operation: the development of track infrastructure ›› extend station tracks; ›› 45.8 km of tracks, including 26.2 km of and equip marshalling yards with ›› develop railway hubs and border main tracks; comprehensive mechanisation and crossing stations; ›› 142 turnouts. automation systems with a view ›› develop marshalling yards; to increasing handling capacities at railway ›› construct and upgrade engineering Reconstruction of railway facilities in the stations. structures; Chechen Republic ›› upgrade the tracks and rail Construction and upgrade of engineering infrastructure on the island of Sakhalin; In 2018, the investment expenses structures ›› develop the Tobolsk–– amounted to RUB 0.4 bn. Korotchaevo railway section; In 2018, the investment expenses amounted ›› reconstruct railway facilities in the Target key performance indicators to RUB 7.7 bn. Chechen Republic. were successfully achieved by the end of the year, with 54 km of power supply The project involves construction and Railway track upgrade lines along the Shelkovskaya–Karginskaya upgrade of bridges and tunnels, including and Karginskaya–Kizlyar sections the ones designed for pedestrians. In 2018, the investment expenses reconstructed, including power supply amounted to RUB 106.6 bn. units at five railway crossings. Construction preparations. Design of future facilities In 2018, 4,700 km of tracks were Construction of second tracks, extension of upgraded1 in line with the approved station tracks, and development of railway In 2018, the investment expenses amounted targets. hubs and border crossing stations to RUB 1.2 bn.

Upgrade of rail infrastructure on the In 2018, the investment expenses During 2018, work was underway to duly island of Sakhalin amounted to RUB 3.5 bn. substantiate construction investment decisions and prepare design documents In 2018, the investment expenses The project aims to increase for infrastructure development projects amounted to RUB 5.3 bn. the throughput and handling capacities scheduled for the future. of the key railway routes with a view 60.1 km of track panels were laid on a dual to allowing passage of freight trains with INVESTMENT EXPENSES UNDER gauge track with three rails. a unified mass of 6,300 t and length of 71 INFRASTRUCTURE DEBOTTLENECKING standard cars. INITIATIVES TOTALLED Develop the Tobolsk–Surgut–Korotchaevo RUB railway section Development of marshalling yards

In 2018, the investment expenses In 2018, the investment expenses 130.8 amounted to RUB 3.3 bn. amounted to RUB 2.8 bn. bn in 2018

1 Overhauls under the track upgrade programme and track overhauls with used materials.

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Enhancement of transportation accessibility in Russia INVESTMENT EXPENSES UNDER This category includes projects to develop ›› commissioning of the Volgograd, TRANSPORTATION ACCESSIBILITY suburban transit infrastructure and Yekaterinburg and Nizhny Novgorod ENHANCEMENT PROJECTS TOTALLED renovate train stations from the long-haul train stations and putting into operation RUB network. 2018 saw completion of the of St Petersburg’s Moskovsky station; following projects: ›› upgrade of St Petersburg’s Finlyandsky, ›› upgrade of the Rostov-Glavny train Vitebsky, Baltiysky and Ladozhsky 11.3 station; (Stage 5) stations; bn in 2018 ›› construction of a transport interchange ›› upgrade of the Samara train station. hub in Gudermes;

Rolling stock renewal initiatives

2018 saw the purchase of: ›› 310 cars for multiple unit trains, INVESTMENT EXPENSES UNDER THE ›› 631 locomotives, including: including 180 cars for electric ROLLING STOCK RENEWAL INITIATIVES --439 electric and diesel locomotives for trains and 130 cars for electric EP3D TOTALLED freight transportation, including those trains. RUB used for pulling heavy-duty trains, --144 shunting diesel locomotives used for shunting, road-switching and hump- 116.7 shunting operations, bn in 2018 --48 passenger locomotives;

Other projects

As part of the project to introduce 2018 also saw efforts to build and renovate INVESTMENT EXPENSES UNDER OTHER resource-saving technologies in railway boarding houses, health resorts, recreation PROJECTS TOTALLED transportation, 1,790 units of resource- centres and other healthcare facilities, RUB saving equipment were installed across including Russian Railways’ facilities of social the Company’s operations in 2018. significance such as recreational camps for children. 9.7 The initiatives to build section houses bn in 2018 for railroad employees helped increase the Company’s housing stock by 7,190 sq m (or 143 housing units).

Investment programme for 2019

Total allocations under the 2019 The investments will be distributed ›› RUB 117.9 bn to renew rolling stock investment programme will total as follows: (including RUB 95.6 bn to renew traction RUB 681.9 bn, including: ›› RUB 291.2 bn to develop rail stock); ›› RUB 549.9 bn of the Company’s own infrastructure; ›› RUB 10.9 bn to deliver on other projects cash; ›› RUB 114 bn to enhance safety; (including promotion of resource-saving ›› RUB 49.6 bn of allocations from the ›› RUB 136.5 bn to address the issues of technologies, social initiatives, etc.). federal government; rail infrastructure debottlenecking; ›› RUB 47 bn of funds provided by the ›› RUB 11.4 bn to enhance transportation government of Moscow; accessibility in Russia, including ›› RUB 35.4 bn of funds provided by the by developing suburban transit Russian National Wealth Fund (preferred infrastructure and renovating train shares). stations from the long-haul network;

Russian Railways Performance overview Sustainable development Corporate governance Appendices

Key focus areas of the investment programme up to 2025

The priority projects are primarily defined as initiatives included in the Comprehensive Plan for Upgrading and Expanding Core Infrastructure and initiatives implemented in pursuance of the Decree of the President of the Russian Federation No. 204 On National Goals and Strategic Objectives of the Russian Federation through to 2024 dated 7 May 2018:

UPGRADE OF INFRASTRUCTURE OF THE approaches to ports of the North-Western CONSTRUCTION OF A WESTERN BYPASS BAIKAL–AMUR AND TRANS-SIBERIAN basin in 2020. AT THE SARATOV TRANSPORT HUB with MAIN LINES designed to enhance the the expansion of the Lipovsky–Kurdyum throughput and carrying capacity of the CONSTRUCTION OF THE MOSCOW– section designed to boost development of railways (Stages 1 and 2). KAZAN HIGH-SPEED RAILWAY the far approaches to the ports of the Azov (the first stage envisages work on the and Black Seas. DEVELOPMENT AND UPGRADE OF Zheleznodorozhnaya–Gorokhovets INFRASTRUCTURE SERVING PORTS section and commissioning of route ENHANCEMENT OF THE THROUGHPUT OF THE AZOV AND BLACK SEAS involving to Nizhny Novgorod using the existing AND CARRYING CAPACITIES to achieve comprehensive renovation of the Maxim infrastructure). The project aims to a fourfold increase in transit container Gorky–Kotelnikovo–Tikhoretskaya– improve transport links between different traffic and reduce travel times from the Krymskaya section and construction of a regions of Russia and create a network of Far East to the western border of the bypass at the Krasnodar Transport Hub, high-speed and ultra high-speed railway Russian Federation to seven days. construction of second tracks on the routes in the country. Taman Peninsula, extension of station The Long-Term Development Programme tracks, development of railway hubs, and DEVELOPMENT OF THE NORTHERN encourages creation of public–private upgrade of power supply units. The project LATITUDINAL RAILWAY to facilitate partnerships in the realm of railway primarily seeks to ensure transportation freight transportation from the northern transportation (including use of 59.8 mt of additional freight on the near parts of West Siberia (23.9 mtpa of of concession agreements) to ensure and far approaches to the ports of the primarily gas condensate and bulk oil) and financing for new lines by leveraging Azov and Black Seas and create a carrying reduce travel times to the ports of the state investments and funds of the capacity of up to 125 mt by 2020. North-Western and Ural Federal Districts. infrastructure owner, cargo owners and other stakeholders. The following DEVELOPMENT OF THE CENTRAL RECONSTRUCTION OF THE projects are to be implemented as part TRANSPORT HUB’S INFRASTRUCTURE. MOROZOVSKAYA–VOLGODONSKAYA of concession agreements: The project seeks to boost throughput RAILWAY SECTION to allow for the transit and handling capacities of the railway of 25 train pairs on the Morozovskaya– RECONSTRUCTION OF THE – infrastructure to cater to the increasing Yuzhnaya–Kuberle section and ensure KOTLAS–CHUM– number of passengers that use the the planned freight transportation SECTIONS adjacent to the Severnaya Central Transport Hub. A railway link volumes to the ports of the Azov and Railway, including the Obskaya station, and to the Northern Terminal Complex of Black Seas by diverting train traffic to the the –Novy –Korotchaevo Sheremetyevo Airport is in the pipeline Morozovskaya–Volgodonskaya section. line of the Sverdlovskaya Railway; to integrate airport terminals with the rail infrastructure (the passenger traffic DEVELOPMENT OF THE PERM– CONSTRUCTION OF A RAILWAY is expected to reach up to 2.8 million SOLIKAMSK CONNECTION to enable TO CATER TO THE NEEDS OF THE people per year by 2025). Another plan is transportation of rising freight volumes KALUGA SPECIAL ECONOMIC to launch intracity train diameters and from the Bereznikovsko-Solikamsky ZONE (including design, construction reduce intervals between trains on the industrial hub (up 9.7 mt in 2025). and operation of rail infrastructure Moscow Central Ring to four minutes, while between the Lyudinovo-1 station of the also working on the development of radial DEVELOPMENT OF THE PERM RAILWAY Moskovskaya Railway and the Kaluga routes and integration of transport stops. HUB and the construction of a river special economic zone). crossing to facilitate future transportation DEVELOPMENT AND RENOVATION of freight volumes by diverting most of OF THE RAIL INFRASTRUCTURE SERVING the freight traffic to the route bypassing PORTS OF THE NORTH-WESTERN the city and encourage development BASIN to cater to the expected freight of infrastructure for the urban land transportation volumes of 145.6 mt on transport.

Annual Report 2018