About the company Strategic report Performance overview

Investment activities

Investment programme approaches

The Company’s investment programme The projects’ commercial efficiency Budget efficiency for projects is assessed is designed to: is assessed based on the net cash flow based on comparison of cash inflows (tax, • ensure uninterrupted transportation from investing and operating activities, customs and insurance payments) resulting service; with the resulting estimates taking into from railway infrastructure development • embrace the most promising projects consideration the financial aftermaths vs government-financed investments. in terms of both commercial and budget for the investment project owner assuming efficiency; that such owner fully covers the project • minimise federal government spending costs and reaps all of its benefits. on investment projects. has uniform guidelines in place to assess the efficiency All the investment projects have of investment projects1. With a payback commercial and budget efficiency period of up to 20 years and an IRR estimates in place and are ranked using of at least 10%, an investment project the cost/benefit analysis. is deemed to be sufficiently efficient.

1. In accordance with the Russian Government’s Order No. 2991-r dated 29 December 2017.

76 Russian Railways Sustainable development Corporate governance Appendices

Investment highlights in 2019

As adjusted by the Board of Directors PROJECTS INCLUDED the target was met with 115.8 mt of cargo of Russian Railways, the Company’s INTO THE COMPREHENSIVE transported from the main deposits 2019 investment programme totalled PLAN FOR UPGRADING of the Eastern Operating Domain. RUB 688.7 bn2. AND EXPANDING CORE Development and renovation Expenses incurred in 2019 as part INFRASTRUCTURE UNTIL of the rail infrastructure serving of the Russian Railways investment 20243 ports of the and Black Seas programme came in at RUB 674.1 bn, In 2019, the investment expenses including: 2019 investment expenses: amounted to RUB 14.3 bn (including • RUB 590.5 bn using the Company’s own RUB 6.2 bn allocated by the federal cash; government). • RUB 83.6 bn in government support.

​164.5 In 2019, the service was launched On top of that, RUB 2.1 bn was raised RUB bn in the Transport Hub, from third-party investors. a 128.8 km two-track electrified Kozyrki– Upgrade of the rail infrastructure Grechanaya line was commissioned, of the Baikal–Amur the Kirpili station was built and a fire pump and the Trans-Siberian main lines station was set up at the Kuteynikovo (Eastern Operating Domain) station. In 2019, the investment expenses amounted to RUB 35.0 bn (including RUB 16.9 bn The aggregate carrying capacity sourced from the National Wealth Fund). of the sections serving ports of the Azov and Black Seas in 2019 stood at 93 mt The project is aimed at developing (up 10.7% vs 2018). and upgrading the rail infrastructure to increase the carrying capacity Freight transportation by rail on this route on routes to sea ports and Far East was 83.5 mt (down 0.6% vs 2018) due border crossings by 55–66.8 mt in 2020 to a decline in export of grain and ferrous vs 2012. It will facilitate transportation metals. of 113.2–124.9 mt of hard coal and various ores from the main mineral deposits Development of the Central of the Eastern Operating Domain in 2020. Transport Hub In 2019, the investment expenses The key highlights of 2019 include amounted to RUB 87.6 bn (including the commissioning of five railway bridges RUB 12.6 bn allocated by the federal (including a river crossing over the River government and RUB 44.6 bn allocated Zeya) and the Vladivostok tunnel. In 2019, by the government).

2. Meeting of the Board of Directors of Russian Railways of 25 October 2019 (Minutes No. 5). 3. The Russian Government’s Order No. 2101-r dated 30 September 2018.

Annual report 2019 77 About the company Strategic report Performance overview

78 Russian Railways Sustainable development Corporate governance Appendices

The project aims to increase suburban Development and renovation In the medium term, it is planned to be passenger traffic of the Central Transport of the rail infrastructure serving extended to Kazan and Hub to 850 m passengers annually by 2024. ports of the North-Western basin and then to Beijing in the east and Berlin 2019 investment expenses: RUB 13.5 bn. in the west. Under the project, the following milestones were completed in 2019: The project is designed Infrastructure expansion • launch of the Karacharovo station to facilitate 146.6 mt of projected and upgrade on the Severnaya (transfer from the Gorkovsky route freight transportation volume in 2020, and Sverdlovskaya Railways to the was with subsequent rise to 192 mt by 2025. allowing for additional cargo reduced by 500 m); Activities under the project: traffic as part of the Northern • launch of Innovation Centre, a new • construction of the second track Latitudinal Railway project transport stop on the route and electrification of the – In 2019, the investment expenses to provide transport accessibility Primorsk–Ermilovo section; amounted to RUB 1.5 bn. for residents of Skolkovo Technopark; • comprehensive upgrade of the Mga– • opening of a second exit Gatchina–Weimarn–Ivangorod section The project aims to put in place a latitudinal at the Streshnevo station and rail infrastructure serving ports railway connecting the Severnaya of the Moscow Central Circle providing on the southern shore of the Gulf and Sverdlovskaya Railways as an essential a weather-protected transfer of Finland; element in the Arctic Transport System to the Leningradskaya transport stop, • launch of high-speed passenger and associated infrastructure. which was previously moved; transportation at the St Petersburg– • completion of work Buslovskaya section; The project will help reduce the length to construct the fourth main track • improved throughput capacity of transportation routes linking mineral of the Karacharovo–Zheleznodorozhnaya of the Volkhovstroy–Murmansk deposits in the northern part of West Siberia section; and Dmitrov–Sonkovo–Mga routes. to the ports of the Baltic, White, Barents • opening of the Severyanin transport and Kara Seas and thereby contribute stop upgraded as part of a project By the end of 2019, the project helped to the development of the Russian Arctic. to integrate the Yaroslavl route, marking the Company reach its 2020 target the final stage of an effort to integrate and transport 152.5 mt of freight against Construction of a western radial routes and the Moscow Central the plan of 138 mt (up 10.5% against the plan). bypass at the Saratov Transport Circle; Hub of the Privolzhskaya • launch of first priority diameter routes: First stage of the Moscow–Kazan Railway with the expansion MCD 1 from Odintsovo to Lobnya High-Speed Railway of the Lipovsky–Kurdyum section and MCD 2 from Nakhabino to Podolsk; 2019 investment expenses: RUB 0.1 bn. 2019 investment expenses: RUB 0.8 bn. • transition to a four-minute interval service at the Moscow Central Circle The construction of the first stage The main aim of this investment project during peak hours; of the Moscow–Kazan High-Speed Railway is to expand the railway infrastructure • completion of bulk of the work (Zheleznodorozhnaya–Gorokhovets High- with a view to enhancing the carrying capacity to construct the fifth main track Speed Railway) with the commissioning on the approaches to the Saratov Transport from the Moscow-Passazhirskaya- of route from Moscow to Nizhny Hub and increasing freight volumes by at least Yaroslavskaya station to the Mytishchi Novgorod is the pilot project of high-speed 49.2 mt compared to 2015. The initiative station and launch of additional electric transportation in . The railway is linked to the Development and Renovation trains. is expected to become the first section of the Rail Infrastructure Serving Ports of the new Eurasian transit corridor. of the Azov and Black Seas project.

Annual report 2019 79 About the company Strategic report Performance overview

Electrification of the Rtishchevo– The project is designed and use EP-20 dual-system locomotives Kochetovka section to accommodate rising freight volumes at the Moscow–Rostov-on-Don– 2019 investment expenses: RUB 0.5 bn. from the Bereznikovsko-Solikamsky –Adler section. industrial hub by providing the Solikamsk– The project aims to reduce operating Perm Sortirovochnaya route for freight Upgrade of the Baikal–Amur costs by cutting down on fuel and energy trains with a weight of 6 kt and a length and Trans-Siberian main lines expenses, decrease running times of 71 standard cars. (phase 2) of freight trains and deliver freight In 2019, the investment expenses faster, improve carrying capacity Development of the Perm Railway amounted to RUB 4.6 bn. of the Rtishchevo–Kochetovka section Hub and the construction taking into account plans to increase of a river crossing The Company continued its work the volume of freight trains, as well 2019 investment expenses: RUB 0.3 bn. on designing facilities. The freight volumes as deliver savings in operating costs in the Eastern Operating Domain were associated with locomotive maintenance The project aims to divert railway traffic updated and the points of origination and repairs, operations of locomotive from the Perm II–Levshino section, and termination of freight flows were crews, and train downtime at stations ensure safe operation of hydraulic identified. As a result, the list of activities when changing traction. In 2019, drafting structures, protect local residents was adjusted accordingly. of design documents was underway. and territories from emergencies, and accommodate rising freight volumes Throughput increase Reconstruction of the Bereznikovsko-Solikamsky industrial at the Artyshta– of the Morozovskaya– hub. Mezhdurechensk–Tayshet section Volgodonskaya railway section 2019 investment expenses: RUB 1.5 bn of the North Railway Following the work completed in 2019, 2019 investment expenses: RUB 0.7 bn. the Company and the government The project aims to facilitate transportation of the Perm Territory chose the final route of additional coal volumes from deposits The Morozovskaya–Tsimlyanskaya section for the railway with the construction in the Kuzbass region and to transport was upgraded in 2019. The section of a railway river crossing freight from the Kyzyl–Kuragino railway is equipped with automatic block over the Kama River and connection after it is commissioned. In 2019, drafting signalling and power supply systems, of the railway at the Blochnaya–Kabelnaya of design documents continued underway. with receiving and departure tracks and Balmoshnaya–Levshino sections. reconstructed at the Kumshalek, Key technical solutions Kuteynikovskaya and Cherkasskaya Feasibility study for the project and feasibility assessment stations. The work completed to electrify the Ozherelye– of the project for the construction in 2019 helped to increase the capacity Uzlovaya–Yelets section linked of the Selikhin–Nysh railway of the Morozovskaya–Tsimlyanskaya to the project to electrify line with a passage across section to 25 train pairs per day, making the Rtishchevo–Kochetovka the Nevelsky Strait taking it possible to divert part of transit section into account the construction freight traffic from the key passenger 2019 investment expenses: RUB 0.5 bn. of a new port on Sakhalin route of Likhaya–Rostov to the Likhaya– 2019 investment expenses: RUB 2.1 bn. Morozovskaya–Kuberle–Tikhoretskaya The key objectives route. of the project are to divert passenger The project aims to ensure uninterrupted trains from the Kazan and Paveletskoye transport access to Sakhalin and develop Development of the Perm– routes of the Moskovskaya Railway, railway transport on the island. Solikamsk connection increase capacity of the Uzlovaya– A stationary bridge crossing will help 2019 investment expenses: RUB 0.5 bn. Yelets section to 65 train pairs by 2030 develop the island’s port capacities.

80 Russian Railways Sustainable development Corporate governance Appendices

Enhancement of the throughput The project aims to accommodate future The project aimed to ensure and carrying capacities freight volumes at the Mezhdurechensk– the transportation of the expected volumes to achieve an increase in transit Tayshet section to service increased freight of hydrocarbons from the Yamalo-Nenets container traffic transportation from the Kuzbass region and Khanty-Mansi autonomous areas 2019 investment expenses: RUB 0.8 bn. to ports in the Far East. by gradually ramping up the throughput and carrying capacity of the Tobolsk–Surgut The project aims to increase transit 2019 saw the commissioning of second railway section to 66 train pairs per day. container traffic fourfold by 2024 tracks on the sections of Irba–Krasny against 2018. In 2019, drafting of design Kordon, Zhuravlevo–Razyezd 557 km In 2019, 25.1 km of second tracks were put documents continued underway. (first phase), Dzheb–Shchetinkino, into operation at the Tanginsky–Ostrovnoy– and a passing loop at the Agul–Korostelevo Obsky, Tobolsk–Surgut, and Kosulino– section. The main work under the project Bazhenovo sections and as part OTHER RAIL is expected to be completed in 2020. of the upgrade of the Surgut station. INFRASTRUCTURE The construction of the second main track DEVELOPMENT PROJECTS Construction of the Prokhorovka– throughout the Tobolsk–Surgut section Zhuravka–Chertkovo–Bataysk line (293.89 km) was completed. As required 2019 investment expenses (new rail line on the Zhuravka– by the approved design documents, Millerovo route) the throughput capacity of the section 2019 investment expenses: RUB 0.6 bn. is now 66 train pairs per day.

7.0 As part of the project, work was underway RUB bn in 2019 to equip the Zhuravka–Bochenkovo SAFETY ENHANCEMENT section with centralised traffic control INITIATIVES systems in Voronezh and Rostov-on- Creation of the St Petersburg– Don, complete the equipment of existing In 2019, the investment Moscow High-Speed Railway1 computer-based interlocking systems expenses amounted to 2019 investment expenses: RUB 0.3 bn. for turnout management at the section’s stations with comprehensive information The aim of the project is to develop design protection and cyber safety systems, documents for subsequent construction construct control posts for the overhead ​139 of the St Petersburg–Moscow High-Speed lines (with connecting tracks) RUB bn Railway, which is part of a high-speed railway at the Zaytsevka and Kuteynikovo stations, connecting federal cities of St Petersburg construct heating modules for signalling, This set of investment projects is aimed and Moscow with . centralisation and block signalling at upgrading fixed assets, including those The project’s feasibility study developed staff at the Zaytsevka and Sergeevka whose useful life has ended, and bringing in 2009 was updated along with the financial, stations, install snow fencing and ensure the railway infrastructure in line organisational and legal models, with potential afforestation, and help develop receiving with regulatory requirements. These options considered and reviewed. and departure tracks at the Sokhranovka, include projects to renovate the track Kuteynikovo and Kolodezi stations. infrastructure, upgrade the overhead Comprehensive development lines and automation and telematics of the ’s Development of the Tobolsk– equipment at railway sections and stations, Mezhdurechensk–Tayshet section Surgut–Korotchaevo railway renew power supply equipment 2019 investment expenses: RUB 4.6 bn, section and communication systems, locomotive including RUB 3.3 bn from the federal In 2019, the investment expenses and railcar fleets, and fixed assets budget. amounted to RUB 1.5 bn. at the engineering and utility facilities.

1. In pursuance of Instruction of Russian President Vladimir Putin No. Pr-623 dated 10 April 2019. Annual report 2019 81 About the company Strategic report Performance overview

Other initiatives aim to improve Upgrading railway tracks Construction of second tracks, transportation safety, increase efficiency In 2019, the investment expenses extension of station tracks, of anti-terrorism measures at railway amounted to RUB 138.8 bn. and development of railway facilities, prevent injuries among the public hubs, border crossing stations, at railway infrastructure facilities, improve In 2019, Russian Railways upgraded and marshalling yards traffic safety, and develop the corporate 5,980 km of railway tracks. This allowed In 2019, the investment expenses informatisation programme. the Company to: amounted to RUB 7.8 bn. • reduce the length of railway tracks with exceeded limits of throughput The reporting period saw completion INFRASTRUCTURE in tonnes by 900 km of tracks; of the project to upgrade the Ust-Pera DEBOTTLENECKING • increase the speed of passenger trains station on the Trans-Baikal Railway. on 1,090 km of tracks; On the Privolzhskaya Railway, In 2019, the investment • increase the speed of freight trains we finished the renovation of railway expenses amounted to on 1,110 km of tracks; tracks and signalling control system • reduce the length of permanent speed at the rail yard of LUKOIL-Trans along limit sections on 1,300 km of tracks; with the renewal of public railway • increase the length of continuous welded infrastructure at the Tatyanka station. ​167.3 rails by 1,600 km of tracks. RUB bn We also completed the construction Upgrade of rail infrastructure of two and extension of one railway track In this area, Russian Railways’ investment on the island of Sakhalin at the Vostochny rail yard of the Balezino programme includes projects to build In 2019, the investment expenses station on the . second tracks, extend station tracks, amounted to RUB 7.6 bn. develop railway hubs and border crossing stations, develop marshalling yards, The project seeks to increase the railway construct and upgrade engineering efficiency and improve the transport structures, upgrade the tracks and railway services on the island of Sakhalin to ensure infrastructure on the island of Sakhalin, transportation of the expected freight and develop the Tobolsk–Surgut– volumes. In 2019, over 114 km of tracks were Korotchaevo railway section. converted from 1,067 mm to 1,520 mm gauge.

82 Russian Railways Sustainable development Corporate governance Appendices

PROJECTS TO ENHANCE ROLLING STOCK RENEWAL OTHER PROJECTS TRANSPORTATION In 2019, the investment In 2019, the investment ACCESSIBILITY expenses amounted to expenses amounted to In 2019, the investment expenses amounted to ​141 45.1 RUB bn RUB bn ​10.1 The Company’s initiatives to upgrade This category includes projects RUB bn the rolling stock seek to reduce its wear to introduce resource-saving technologies, The projects are aimed at upgrading and tear, increase performance and boost support social initiatives, fund activities suburban and long-haul passenger safety. aimed at creating Russian Railways’ transportation operations. subsidiaries and affiliates, and pursue R&D In 2019, Russian Railways purchased efforts. In the reporting year, we completed 738 locomotives: the renovation of the Pridacha • 461 locomotives (357 electric Introduction of resource- and Sbega suburban train stations and 104 diesel locomotives) for freight saving technologies in railway and created the suburban transportation transportation, including those used transport infrastructure for the XXIX Winter for pulling heavy-duty trains, In 2019, the investment expenses Universiade in Krasnoyarsk. The Company • 223 shunting diesel locomotives used amounted to RUB 2.8 bn. finished the construction of the passenger for shunting, road-switching and hump- infrastructure at the Kuteynikovo station. shunting operations; The project aims to reduce the Company’s • 54 passenger locomotives (35 electric operating costs, increase efficiency, The year also saw the completion and 19 diesel locomotives). upgrade fixed assets, improve labour of projects to upgrade the train stations safety, and ensure compliance in Volgograd, Yekaterinburg, and Ulan-Ude, On top of that, in 2019 the Company with the regulatory requirements construct a passenger terminal at the train purchased 357 cars for multiple unit trains: for energy efficiency. station in Abakan, and renovate the Ulan- • 199 cars; Ude train station. • 80 cars for electric trains; • 16 railbus cars; • 62 locomotive traction cars.

Annual report 2019 83 About the company Strategic report Performance overview

HIGH-SPEED LINES 1. The Moscow–Nizhny Novgorod – the aggregate length is 421 km; high-speed railway line: – the train travel time will be 2 hours Pursuant to Russian President’s – 301 km – construction of a new and 5 minutes (without stops). Instruction No. Pr-623 of 10 April 2019, track for the Zheleznodorozhnaya– Russian Railways will start engineering Gorokhovets high-speed line section; 2. St Petersburg–Moscow high-speed and surveying under the St Petersburg– – 20 km – construction of a new railway line: Moscow high-speed railway line project track (connecting the Gorokhovets – the length is 684 km; in 2020. station of the high speed railway – the train travel time will be 2 hours line and the Gorokhovets station and 15 minutes (without stops). The St Petersburg–Moscow–Nizhny of the Gorky railway line); Novgorod high-speed railway line project – 100 km – upgrade of the existing consists of two parts. infrastructure;

The project serves the interests of the government, general public and businesses, creating a new platform for long-term economic growth. Over 90% of equipment and materials will be sourced from Russia, including new high-speed trains capable of reaching speeds of up to 400 km/h. The project will help connect metropolitan areas with a total population of over 30 m people. Over 370,000 jobs will be created, including new jobs for more than 48,000 people engaged in the construction of the high-speed railway line. In addition to the above project, priority is also given to the following lines that may form part of the high-speed Eurasian freight and passenger rail corridor: • Kazan–Yekaterinburg; • Yekaterinburg–Chelyabinsk; • Moscow–Krasnoye.

Saint Petersburg–Moscow–Nizhny Novgorod high-speed railway map Nizhny Vladimir Novgorod

A new track of the high-speed railway line Cheboksary Upgrade of the existing infrastructure Sections of the high-speed railway line planned for construction Kazan

Valdai

Tver Moscow

Saint-Petersburg

84 Russian Railways