Russia Infrastructure Report - Q1 2023

Q1 2023
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Russia
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Includes 10-year forecasts to 2031
Russia Infrastructure Report | Q1 2023
Contents
Key View............................................................................................................................................................................................ 4
SWOT .................................................................................................................................................................................................. 5
Infrastructure SWOT.................................................................................................................................................................................................................... 5
Industry Forecast........................................................................................................................................................................... 6
Construction And Infrastructure Forecast Scenario ...................................................................................................................................................... 6
Transport Infrastructure............................................................................................................................................................................................................. 9
Energy & Utilities Infrastructure ...........................................................................................................................................................................................18
Residential/Non Residential Building ................................................................................................................................................................................23
Industry Risk/Reward Index ....................................................................................................................................................26

Russia Infrastructure Risk/Reward Index..........................................................................................................................................................................26
Central And Eastern Europe Infrastructure Risk/Reward Index: Economic Pressures Weakening Scores ............................................28
Competitive Landscape.............................................................................................................................................................36
Company Profile...........................................................................................................................................................................37
Mostootryad No.19....................................................................................................................................................................................................................37
Infrastructure Methodology ....................................................................................................................................................38
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Key View
Key View: In light of Russia's invasion of Ukraine, the outlook for Russia's construction sector remains weak in the near-to-medium
term. Among broad sanctions placed on the market, deterioration in Russia's broader macroeconomic environment will place acute
pressure on construction input costs. Over the long term, we see upside risks as the government unveils plans to invest in
infrastructure through to the end of the decade.
Key Forecasts And Latest Updates
• The Russian construction sector is expected to contract by 4.2% y-o-y and 3.9% y-o-y in 2022 and 2023 respectively, amid the
broad macroeconomic implications of Russia's invasion of Ukraine.
• Russia’s transport infrastructure sector will see real growth flatline at 0.0% in 2022, followed by a 0.3% contraction in 2023 and
an annual average increase of 1.0% in real terms over 2022-2031. We hold a positive outlook for rail and port infrastructure
growth and opportunities due to Asian coal demand growth, and we also identify opportunities for private investment in the road
sector.
• Ongoing conflict in Ukraine, Russia's intervention in Syria and its alleged involvement in US and EU elections risk exacerbating
relations with the West and dragging the country into a prolonged frozen conflict. The standoff at the Ukraine frontier shows
such heightened tensions, which could have economic repercussions should new sanctions be adopted against Russia.
INFRASTRUCTURE - CONSTRUCTION INDUSTRY FORECASTS (RUSSIA 2021-2031)

Indicator 2021 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f
Construction industry value,

5,963.8 6,783.4 7,161.1 7,830.6 8,398.3 8,893.1 9,506.0 10,123.8 10,740.8 11,368.5 12,063.7
RUBbn

5.8 -4.2 -3.9 0.9 1.4 1.1 1.9 2.0 2.1 1.8 2.1
real growth, % y-o-y

4.6 5.1 5.1 5.1 5.0 4.9 5.0 5.0 5.1 5.1 5.2
% of GDP
e/f = Fitch Solutions estimate/forecast. Source: Goskomstat, Fitch Solutions
Risk/Reward Index
• Russia’s performance in our Risk/Reward Index remains relatively weak at 47.7. However, this still places the market above both
the global and regional averages of 50.0 and 46.5 respectively. The economic implications of Russia's invasion of Ukraine have
dramatically reduced the market's relative attractiveness, despite the large size of its construction market relative to the region.
relations with the West and dragging the country into a prolonged frozen conflict.
INFRASTRUCTURE RISK REWARD INDEX (RUSSIA 2022-2022)

Geography Risk/Reward Index Rewards Industry Rewards Country Rewards Risks Industry Risks Country Risks
Russia 47.7 48.5 46.0 52.2 46.5 55.2 37.8

Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Infrastructure Risk/Reward Index
SWOT
Infrastructure SWOT
Strengths Weaknesses
• Strong demand to improve transport infrastructure networks • Domestic state-owned players dominate the market, with little
across the country. penetration from foreign companies.
• Russia's massive oil and gas industry demands significant • Over half of infrastructure funding in Russia comes directly
amounts of auxiliary infrastructure to support the extraction from the government, much of which is dependent on oil and
and transport of hydrocarbons. gas prices.
• The sector is not saturated, with continuing demand for • Weak economic growth potential, rampant corruption and an
infrastructure development across the country resulting from a increasingly tense relationship with the West are key factors
multi-decade period of underinvestment. weighing on Russia's attractiveness to investors.
• The country had a degree of success in utilising public-private • There is a huge regional imbalance in economic development
partnerships prior to the implementation of sanctions, between Moscow and the rest of the country, reflected in the
providing Russia with a proven model to rely on when/if amount of new construction. Provincial towns with small
sanctions are lifted. populations suffer from stagnation and depopulation, creating
a surplus of poor-quality building stock.
Opportunities Threats
• Industrial construction - particularly auxiliary infrastructure that • Elevated political risks surrounding Russia's involvement in
supports the oil and gas sector - will benefit from higher oil and Eastern Ukraine and Syria.
gas prices. • Broad sanctions placed on Russian entities following Russia's
• The proposed development of Eurasian transport corridors invasion of Ukraine dramatically hinder the industry's
across Russia holds considerable potential for stimulating attractiveness for investment.
growth in transport infrastructure and enhancing regional • The deteriorating outlook for the Russian consumer will weigh
connectivity. on additional housing demand and development.
• The deterioration of Soviet-era infrastructure, especially
outside major cities, paves the way for increased investment in
the construction market.
• Opportunities for closer cooperation between Russia and
Mainland China - particularly via involvement in Belt and Road
Initiative projects - will stimulate activity in construction.
Industry Forecast
Construction And Infrastructure Forecast Scenario
Key View: We have revised down our near-term growth outlook for Russia's construction industry in light of Russia's invasion of
Ukraine. Among broad sanctions placed on the market, deterioration in Russia's broader macroeconomic environment will place
acute pressure on construction input costs.
Latest Developments
• We have revised down our near-term growth outlook for Russia's construction industry in light of Russia's invasion of Ukraine,
and we expect the market to contract by 4.2% y-o-y and 3.9% y-o-y in 2022 and 2023 respectively.
• Key domestic financiers will see their activities curtailed by sanctions, which given the industry's broad reliance on domestic
financiers will result in broad upheaval for both existing and potential project financing arrangements.
• The composition of Russia's project pipeline, with a majority of projects across all sectors at pre-construction, leaves the market
particularly vulnerable to project slippage as the pressures on industry persist.
• Risks to our forecasts are mixed, stemming from the uncertainty over the efficacy of the G7 oil price cap and Russia’s ability to
reroute oil to Asia once EU embargos come into force.
CONSTRUCTION AND INFRASTRUCTURE INDUSTRY DATA (RUSSIA 2021-2031)

Indicator 2021e 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f
Construction
industry value, 5,963.8 6,783.4 7,161.1 7,830.6 8,398.3 8,893.1 9,506.0 10,123.8 10,740.8 11,368.5 12,063.7
RUBbn
Construction
industry value, real 5.8 -4.2 -3.9 0.9 1.4 1.1 1.9 2.0 2.1 1.8 2.1
growth, % y-o-y
Construction
industry value, % 4.6 5.1 5.1 5.1 5.0 4.9 5.0 5.0 5.1 5.1 5.2
of GDP
Infrastructure
industry value, 3,744.00 4,401.88 4,770.38 5,254.74 5,646.34 6,006.71 6,395.19 6,778.23 7,150.80 7,544.19 7,959.57
RUBbn
Infrastructure
industry value real 2.4 -0.9 -1.3 1.6 1.6 1.6 1.5 1.5 1.5 1.5 1.5
growth, % y-o-y
e/f = Fitch Solutions estimate/forecast. Source: Goskomstat, Fitch Solutions
Structural Trends
We have revised down our near-term growth outlook for Russia's construction industry in light of Russia's invasion of Ukraine, and
we expect the market to contract by 4.2% y-o-y and 3.9% y-o-y in 2022 and 2023 respectively. The implications of Russia's invasion
of Ukraine will place direct pressure via sanctions on key domestic financiers and constrain their ability to support the proper
functioning of industry activity, while the indirect pressure of a deteriorating macroeconomic environment will limit the ability of
contractors to continue construction works amid escalating construction input costs.
Implications Of Russia-Ukraine Conflict Prompt Forecast Revision

Russia - Construction Industry Value Real Growth, % y-o-y (2021-2031)
f = Fitch Solutions forecast. Source: Goskomstat, Fitch Solutions
Key domestic financiers are seeing their activities curtailed by sanctions, which given the industry's broad reliance on domestic
financiers will result in broad upheaval for both existing and potential project financing arrangements. We have outlined our
expectations for sanctions being implemented by Western governments to risk broad disruption to projects in Russia, particularly
amid reduced access to financing and capacity to invest on the part of Russian firms. The likes of VTB Bank,
Sberbank and VEB have, in recent years, been among the most active project financiers in Russia's infrastructure competitive
landscape, largely only alongside development banks such as the Asian Infrastructure Investment Bank (AIIB) and the Eurasian
Development Bank. Therefore, direct sanctions against these Russian entities will directly contribute to project disruption.
Furthermore, the withdrawal of funding for Russian activities by the likes of the AIIB, aimed at mitigating the potential reputational
damage of operating in the market, is rapidly reducing the pool of project financiers that would support Russia's construction
activity in the medium term.
The deterioration in Russia's broader macroeconomic environment will place acute pressure on construction input costs. Our
Country Risk team at Fitch Solutions expect that the Russian economy will face a shallower, longer recession than previous
expected, and forecast negative real GDP growth of 4.5% in 2022 and 5.0% in 2023. The economic fallout from the war in Ukraine
will be more evenly distributed across 2022 and 2023, with output set to bottom out in Q323. Provided that oil prices do not
collapse, we expect a gradual recovery from 2024 onwards. Growth will average just 1.4%, with the economy not returning to its
pre-war size until 2028 at the earliest.
Building & Energy Infrastructure Project Pipelines Most At Risk

Russia - Share Of Project Pipeline Threatened By Sanctions, %
Note: A project is at 'Higher Risk From Sanctions' if it involves US, EU or UK companies. Source: Fitch Solutions Infrastructure Key Projects Database
The composition of Russia's project pipeline, with a majority of projects across all sectors at pre-construction, leaves the market
particularly vulnerable to project slippage as the aforementioned pressures on industry persist. According to our Infrastructure Key
Projects Database, just 37% of Russia's project pipeline is currently under construction, with 59% at pre-construction and 4%
suspended.
The energy and utilities infrastructure sector is particularly vulnerable to project slippage, with 65% of projects at pre-construction
and 10% of projects suspended. In particular, the USD3.5bn Kursk II Nuclear Power Plant stands out as the largest power
infrastructure project at significant risk of disruption as a result of a reduction of Western firms' involvement, with
French Framatome having been awarded a contract to manufacture and install a reactor protection system for the plant by 2025.
Multiple renewable energy projects are also at risk of being disrupted and delayed by sanctions due to the involvement of EU
companies. The wind power project pipeline is particularly at risk, including several large-scale projects being developed by Enel
Russia, a subsidiary of Italian Enel. These include the 201MW Kolskaya Wind Farm Project, under construction in the Murmansk
region, and the 71MW Rodnikovsky Wind Farm, being developed in the Stavropol region.
Transport Infrastructure
Key View: Russia’s transport infrastructure sector is expected to stagnate in 2022, following estimated growth of 1.3% in 2021. We
hold an upbeat outlook for rail and port infrastructure growth and opportunities due to Asian coal demand growth, and we also
identify opportunities for investment in the road sector.
Latest Developments
• Russia's large urban population, accounting for around 75% of the total, points towards significant demand for urban
transportation systems in the short-to-medium term, which will be supported by a robust project pipeline of ongoing and
planned rail infrastructure projects.
• We expect growing demand for rail freight, most notably due to rising coal demand in Asia, to boost rail freight infrastructure
investment over the coming years.
• In October 2022, Sinara – GTR Krasnodar, the Krasnodar Territory administration and the municipality of Krasnodar signed a
25-year concession agreement covering the modernisation and development of the tram network in Krasnodar, Russia. The
RUB28.0bn (USD448.8mn) project is backed by RUB12.0bn (USD192.1mn) funding. Under the agreement, Sinara – GTR
Krasnodar will supply new vehicles and install 36.5km of new tracks in four phases. The plans also include the construction of a
new 11.6km extension towards Basket Hall Sport Complex, with the delivery of trams will be completed by the end of 2026.
• As of June 2022, the Moscow Department of Transport has unveiled plans to construct a new metro line in Moscow. Called
Biryulevskaya metro, the line will be 22.2km long with 10 stations in the first stage. The new metro line will connect Line 2, the
Big Circle Line, the Moscow Central Circle, future Line 5 of the Moscow Central Diameter and future Troitskaya line.
• Plans have been unveiled for the construction of new road projects in Russia. The plans include the construction of a highway
crossing over Moskovsky Prospekt in St Petersburg with an estimated investment of USD369.0mn. Site preparation works are
valued at USD164.0mn. The plans also include the construction of a USD1.37bn 35km-long highway, which will connect the
Tavrida highway to the Black Sea's southern coast.
• The Russian government’s plans to increase port capacity is an upside risk to our reduced port infrastructure construction
outlook. We believe that the likelihood of port projects being completed in a timely manner will increase, especially for coal port
terminals in the country's Far East, as Russia seeks to expand exports and facility access to Asian markets.
• However, risks to our outlook remain as the sector's growth will be capped by structural issues facing the broader economy,
including currency risks, prevailing corruption, and a lack of liberalised and competitive markets, which will dent investor
sentiment.
TRANSPORT INFRASTRUCTURE INDUSTRY DATA (RUSSIA 2021-2031)

Indicator 2021e 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f
Transport infrastructure industry value real

1.3 0.0 -0.3 1.1 1.0 1.0 1.0 0.9 0.9 0.9 0.9
growth, % y-o-y
Roads and bridges infrastructure industry value

1.6 0.5 0.1 0.7 0.5 0.7 0.7 0.4 0.4 0.4 0.4
real growth, % y-o-y
Railways infrastructure industry value real growth,

1.4 -0.1 -0.4 1.5 1.4 1.4 1.3 1.3 1.3 1.3 1.3
% y-o-Y
Airports infrastructure industry value real growth,

0.7 -0.8 -1.2 1.1 0.8 0.8 0.6 0.6 0.6 0.6 0.6
% y-o-y
Ports, harbours and waterways infrastructure

0.5 -0.4 -0.5 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1
industry value, real growth, % y-o-y
e/f = estimate/forecast. Source: Goskomstat, Fitch Solutions
Structural Trends
Downside Implications Following Invasion Of Ukraine
Following Russia's invasion of Ukraine in February 2022, we expect that an expansion of sanctions enacted by Western governments
will significantly raise the risks of disruption and delay for infrastructure projects in Russia. A decline in Western firms’ involvement in
the Russian market, reduced access to inputs as a result of export controls, and reduced access to financing and capacity to invest
on the part of Russian firms are expected. In the transport infrastructure sector, we highlight the USD8.9bn Moscow – Kazan
Highway Project as being exposed to EU sanctions due to the involvement of Italian construction company ANAS. In the rail sector,
the planned USD36bn St. Petersburg – Nizhny Novgorod High Speed Rail Line is at modest risk of being delayed due to limited
involvement of German Knorr-Bremse, which is set to provide the trains with equipment, including breaks and air conditioning
systems.
Slow But Sustained Growth For Rail Infrastructure
Rail infrastructure construction in Russia will experience slow but sustained growth, expanding by an annual average of 1.0% in real
terms over 2022-2031, driven by demand fundamentals, including a large urban population and growing demand for rail freight
towards Asia. Russia's rail network stretches to over 87,000km of broad-gauge track, making it the third longest in the world after
the US and Mainland China. Hence, the network offers good coverage, despite the large size of the country. Russia's main cities and
ports are connected through rail, with extensive rail lines in the highly populated areas of Western Russia, as well as connections to
Murmansk and Archangelsk in the Arctic Circle; and across Siberia via the Trans-Siberian Railway, linking with the port of Vladivostok
in Russia’s Far East. Moreover, several major cities, including Moscow, St Petersburg, Nizhny Novgorod and Novosibirsk, have
operating metro systems. In this sense, the need to satisfy demand from both urban centres and port connections through rail will
focus on upgrading and developing new links between, and within, cities and trade centres.
Slow But Sustained Growth For Rail Infrastructure In Russia

Russia - Map Of Main Railway Links
Source: Fitch Solutions
Russia's large urban population, accounting for around 75% of the total, points towards significant demand for urban transportation
systems in the short-to-medium term, supported by a robust project pipeline of ongoing and planned rail infrastructure
projects. Such transport needs are reflected in the relative shares of all rail projects accounted for by urban and intercity rail projects
within the country’s project pipeline (excluding completed and cancelled projects). According to our Infrastructure Key Projects
Database (KPD), which captures projects over USD30mn in value, urban rail projects, such as metro, commuter and light rail
projects, account for 37.5% of the total number of rail projects. In contrast, intercity rail projects, such as mainline and high-speed
rail, account for 28.1% of the entire rail project pipeline.
Among large-scale urban rail projects underway in the country is the USD17.0bn Moscow Metro Expansion project, which includes
the construction of the Big Circle Line (Line 11), a 69km line that will be linked to four stations of the current Moscow Central Circle
line, helping reduce congestion in both lines, as well as surrounding lines. Moreover, there will be additional 16 interchanges with
other lines on the network. The first section of the Big Circle Line opened in the northwestern side of the line with five stations in
February 2018 and added a further station in December 2019. The eastern section of the line between the Aviamotornaya and
Lefortovo stations was operational in 2020. Other plans in the Moscow Metro Expansion include: a 3.7km extension of the Line 8
between Delovoy Tsentr and Tretyakovskaya, in the centre of the city, and another extension of Line 8 towards Vnukovo Airport; a
southern extension of Line 1 to Potapovo; and a northern extension of Line 10 to Fiztekh.
Complementary to the ongoing Moscow Metro Expansion is the construction of two more lines that will be linked to the Big Circle
Line - the Biryulyovskaya line and the Rublyovo – Arkhangelskaya line, where both projects' first sections are expected to be
operational by 2024-2025, and their respective extensions being completed by 2028. We highlight that these two projects started
construction in 2020, preventing the construction and infrastructure sector from further contraction in 2020 due to the effects of
the Covid-19 pandemic.
Although we expect Russia's population to contract over the next decade and beyond, the share of the country’s urban population
relative to the total population will increase and reach 83% by 2050. That means that even if expansions currently underway fulfil
future transport needs, Russia's urban rail transportation systems could start feeling pressure beyond 2031, leading to a continuous
need for investment over the long term.
High-speed rail projects connecting Russia’s main urban centres will become highly relevant to help decompress congestion in the
Moscow region, in particular, in the long term. Among the high-speed rail projects already under construction is the Moscow –
Kazan High-Speed Rail project, valued at USD22.4bn. The project is part of China’s Belt & Road Initiative (BRI) and started
construction in September 2020, after being postponed in March 2020 due to its high cost. Additionally, and standing out as the
largest project in Russia's rail project pipeline, is the USD36.0bn St. Petersburg - Nizhny Novgorod via Moscow High-Speed Rail Line.
The 1,080km high-speed line, currently at planning stages, will be built in two sections - the St Petersburg-Moscow section (659km)
and Moscow-Nizhny Novgorod section (421km). The Moscow-Nizhny Novgorod line is expected to open in 2024, and the Moscow-
St Petersburg section is expected to be operational in 2027, with construction scheduled to begin in 2022. Projects at the planning
stages will prompt passenger rail infrastructure growth until the end of our forecast period. However, we note that both projects
face significant project development risks in terms of delays, due to the large scale and complexity both projects entail.
Increasing Demand For Urban Transport Services

Russia - Population Growth, Urban Population Growth & Share Urban Population Of Total Population
f = Fitch Solutions forecast. Source: UN, Fitch Solutions
We expect growing demand for rail freight, most notably due to rising coal demand in Asia, to boost rail freight infrastructure
investment over the coming years. The railway network is a key mode of freight transport in Russia, offering better quality and more
efficient connections than roads in remote areas and for long-distance supply chains, such as those heading to the Far East. Rail
freight in Russia mainly caters to bulk cargo and export commodities, such as oil, coal, metals and construction materials. We expect
a gradual reorientation of Russia's coal exports from Europe to Asia will be driven by growing demand for coal in the region,
supporting demand for freight rail infrastructure towards Russia’s Far East. We expect growing rail freight demand to support
investments both in the upgrading of existing freight infrastructure and development of new freight lines beyond our forecast
period.
Asian Coal Demand To Drive Russian Rail Freight

Russia - Rail Freight Tonnage (2021-2031)
e/f = Fitch Solutions estimate/forecast. Source: Russia State Statistical Service, Fitch Solutions
China's BRI is an exceptionally bright spot for the Russian rail freight sub-sector. Given that Russia's geography spans the Eurasian
landmass, and that the country is uniquely placed to facilitate the expansion of trans-Eurasian trade, Russia will continue to be a
focal point for the BRI. Rail infrastructure will be the primary beneficiary, with Chinese companies playing construction and financing
roles in projects, such as the USD5.7bn Belkomur-Arkhangelsk freight railway, currently at the planning stage.
While we expect Chinese companies and institutions to invest in projects throughout Russia, the geographical proximity to China
and the wealth of natural resources located in Russia’s Far East will combine to see the region emerge as a favoured investment
destination. A large-scale project currently at planning stages in Russia's Far East is the USD10.0bn Nevelskoy Strait Bridge, to be
completed by 2035. While the project is not part of the BRI, it is of strategic importance as it would link the mainland to the Sakhalin
Island in the Far East, guaranteeing a land route of Western goods travelling on trans-Asian railways through Russia. However, we
maintain a cautious view of the project's development given the early stages of the project.
Strong government support will be key to advancing Russia’s rail investment plans, with recent government announcements
regarding additional infrastructure spending over the next three years boding well for the sector. In particular, the announcements
point to significant progress toward achieving the Comprehensive Plan for the Modernisation and Expansion of the Main
Infrastructure (CPMEI), a transport infrastructure plan aimed at upgrading Russia’s transport links over 2019-2024. In 2018, the
Russian government launched the CPMEI to invest RUB6.3trn (USD86.9bn) over a period of five years to improve connectivity
across Russia’s regions through the expansion and modernisation of infrastructure across all transport sectors. In September 2021,
the Russian government announced it would spend RUB1.6trn (USD21.8bn) from the National Wealth Fund (NWF) on infrastructure
projects. Currently, the NWF contributes a small share of the financing of the CPMEI; however, it still provides upside risk to
accomplishing the CPMEI and to our transport infrastructure construction growth forecasts.
Rail accounts for a large share of the investment under the CPMEI, and Russian Railways (RZD) is an integral part of the plan as
Russia's state-owned rail company, serving as the primary sponsor for the projects included. Therefore, RZD's investment plans over
the next four-to-five years revolve around projects under the CPMEI.
The total required investment to complete the rail projects in the CPMEI is RUB2.5trn (USD34.0bn), spanning several initiatives
included in the plan, such as the North Sea Route, Railway Transport and Road infrastructure, connecting centres of economic
growth, and high-speed rail. RZD is expected to provide 64% of the financing (RUB1.6trn), with the rest of the funding coming from
the federal budget (14%), third party investors (13%), the Moscow regional government (6%) and the NWF (3%).
Among the highest-profile projects included in the plan are the modernisation of the Baikal-Amur and the Trans-Siberian Railways.
The project costs involve RUB673.3bn to expand Russia's two longest railroads and boost cargo capacity for coal and other goods to
182mn tonnes a year by 2024. Capacity already more than doubled to 144mn tonnes under a modernisation plan that began in
2013. In July 2020, new legislation allowed clear-cut logging in the construction and restoration of infrastructure in the Baikal-Amur
Mainline and the Trans–Siberian Railway. The logging permission is temporary and expires in 2024, permitting track expansions
along the rail lines. RZD announced that the company has no plans to build new train tracks along Lake Baikal's coastline, only to
restore existing stations and active railway lines between them, while constructing additional tracks and some process facilities
along Baikal-Amur Mainline and the Trans-Siberian Railway. The project's targets were updated, and it now expects to reach 210mn
tonnes a year by 2025, for which an additional RUB203.4 will be invested in the project over 2024-2025.
Besides the Moscow–Kazan High-Speed Rail project, one of the most significant projects included in the programme is the Central
Transport Hub, which aims at improving Moscow's transport system by integrating railway transport into the urban passenger
transport system. The project is valued at RUB568.8bn, and has several sponsors, such as the regional government of Moscow. RZD
will contribute a share of RUB236.6bn to the development of the project.
Despite privatisation efforts in the rail sector, which have seen some freight entities being shifted from government-owned RZD to
the private sector, the biggest drag on growth will remain the state's influence on key sectors of the economy and society more
broadly, as well as the lack of meaningful progress towards a more liberal economic system, which ultimately undermines business
sentiment. This has resulted in Russia's broad construction sector being dominated by large, well-established domestic players, with
the capacity to undertake numerous construction roles in major projects, limiting rail construction opportunities for foreign
contractors. Data from our Infrastructure KPD show Russian construction firms occupying close to 63% of all construction roles
across the country's project pipeline, with Chinese contractors holding a distant 18% of such roles. The prevalence of corruption
and high legal risk, combined with international sanctions on Russia's economy, have ensured that project financing in the country's
project pipeline remains undiversified and concentrated primarily among domestic financiers, except for the rail sector, which
accounts for an important share of participation from Chinese entities acting as financiers, such as China Railway International
Group and Asian Infrastructure Investment Bank.
Railway Infrastructure Dominates

Transport Infrastructure Value By Sector (2020-2026)
e/f = estimate/forecast. Source: Fitch Solutions
Road Opportunities In Russia Despite Project And Industry Risks
• We hold a positive outlook for road construction in Russia, supported by the country's size and its need to improve connectivity
within the country, as well as a robust project pipeline of road projects.
• While the government seeks to attract more private investment to the road sector, high perception of corruption hinders the
attractiveness of the market.
• Risks to our outlook remain, as high exposure to currency risks are likely to impact construction costs and financing.
We hold a positive view on road construction opportunities in Russia, driven by a large need to improve connectivity within the
country and a strong pipeline of planned road projects. The Russian road network extends to over 1.2mn km, but this is relatively
limited in density terms, given the huge size of the country. Consequently, there are vast areas of land, particularly in the east, which
are not connected to the road network. That said, these poorly connected regions are sparsely populated and have little economic
value so most of the investment will be directed towards upgrading the current road network which has suffered from a lack of
investment. Supporting this view, our Operational Risks team notes that Russia’s road network is exposed to risks due to the variable
quality of the roads and, with only 72.3% of the roads being adequately paved, the most prominent of these risks being the poor
quality of road surfaces.
Russian Port Infrastructure Investment Supported By Asian Coal Demand
The Russian government’s plans to increase port capacity pose an upside risk to our reduced port infrastructure construction
outlook, with growth currently forecast to average 0.1% per annum between 2022 and 2031. In 2020, in the Comprehensive Plan
for the Modernization and Expansion of Main Infrastructure, the Russian government set a target to increase its port capacity to
1.5bn tonnes by 2030. FSUE Rosmorport, the state-owned enterprise in charge of managing and developing port infrastructure
in Russia, plans to invest around RUB19.0bn (USD253.7mn) from 2020 to 2030. According to Rosmorport, port capacity was meant
to have increased in 2021 by 50mn tonnes, pointing to a higher growth rate in terms of capacity after commissioning facilities for
32.7mn tonnes in 2020.
A major project under construction is the dry bulk terminal of the Taman port project in the Black Sea basin, adding 25.0mn tonnes
to the target. In March 2021, the Taman port project’s second phase was approved. This phase will include the construction of
specialised terminals for coal, grain and fertiliser. Another important development is the first phase of the Sukhodol Coal Terminal
Project, located in the Far Eastern Federal District, adding 6.0mn tonnes. This project will increase export capabilities in the Far
Eastern basin, especially coal exports to large markets in the Asia-Pacific region, such as China and Japan.
Another large port likely in the coming years is the Aurora Port. CoalStar unveiled in early 2022 plans to invest around RUB60.0bn
(USD777.9mn) for the construction of a new seaport in Bezymyannaya Bay. The proposed Aurora seaport will be located in the
Danube settlement. The firm will build the port terminals, with an expected capacity of 25mn tonnes of coal and 10mn tonnes of oil
per annum. The overall project is planned to be implemented between 2025 and 2030.
We believe that the likelihood of port projects being completed in a timely manner will increase (especially for coal port terminals in
the country’s Far East) as Russia seeks to expand exports and facilitate access to Asian markets, particularly as European demand for
coal has been on a long-term downward trend. Our Infrastructure KPD shows that 50% of port projects, at pre-construction and
under construction, are projects either with specialised coal terminals or capable of handling coal shipments. Half of those coal port
projects are located in the Far East region, highlighting the government’s strategy to develop the coal industry by transferring
production centres to this region through to 2030. In 2020, coal exports from Russia’s Far East grew by 10.5% y-o-y, reaching
107.2mn tonnes.
In the short-to-medium term, investment in coal ports will be supported, as Russian coal exports to China continue to benefit from
China’s ban on Australian coal imports (amid increasing China-Australian trade tensions). China was the fastest-growing export
market for Russia’s coal between 2018 and 2019. Demand for coal increased during the second half of 2020, driven by Chinese
demand. This demand is as a result of the country’s ban on Australian coal and rising demand from other key Asian markets due to
unusually cold temperatures. In the long term, coal ports in the Far East will continue to be of strategic importance, as any
substantial change in China’s use of coal will most likely occur beyond 2031. Our Power team forecasts China's coal-fired power
generation to remain close to 2021 levels throughout the decade. The 14th Five-Year Plan did not indicate an explicit commitment
to shift away from coal.
Arctic Key To Growth In Port Activity
An increased focus on developing infrastructure in the Arctic Circle will be a long-term theme for the Russian ports infrastructure
sub-sector. The development of such infrastructure holds the potential to facilitate an alternative maritime trading route. We note
that much activity in developing Arctic infrastructure remains in the planning phase, and until a roster of viable projects enter
Russia’s project pipeline, we will refrain from revising our growth forecasts for the sub-sector.
Arctic Transport and Industrial Centre Arkhangelsk has signed a memorandum of understanding (MoU) with China-based
Poly International Holdings to build a deepwater port 55km north of Arkhangelsk in north-west Russia. The MoU also includes
the construction of the 1,161km Belkomur railway line, 449km of which already exists. The port is expected to operate throughout
the year with the help of icebreakers. Russia is increasing its focus on Arctic development. In April 2019, President Vladimir Putin
unveiled plans to increase the country's foothold in the Arctic, including building new ports and other infrastructure facilities,
expanding the nuclear icebreaker fleet, and revamping military bases. Russia plans to expand the ports on both sides of the Arctic
shipping route - Murmansk on the Kola Peninsula and Petropavlovsk-Kamchatsky on the Kamchatka Peninsula.
Talks between AEON Corporation and RZD concerning the construction of the Indiga coal export port in the Nenets Autonomous
Region and a railway line present upside to our muted forecasts. AEON will possibly invest RUB60.0bn (USD890.0mn) in the project.
The port is projected to export up to 80mn tonnes of coal and provide high-tonnage access to the Northern Sea Route. The
RUB300.0bn (USD4.5bn) project has been resechduled, with construction to start in 2023 and commissioning expected by 2028.
Currently, AEON is conducting assessments on the construction site, including an environmental assessment which, according to
the company, requires special approaches due to location conditions.
Most recently, in July 2022, Rosneft has started the construction of an Arctic oil terminal at the Bukhta Sever port. The terminal will
be part of the Vostok Oil project, which will enable development of the Northern Sea Route. Rosneft plans to tranship around
600,000 barrels of oil per day via the Bukhta Sever port per annum initially with a gradual increase to 100.0mn tonnes by 2030.
RUSSIA - MAJOR TRANSPORT INFRASTRUCTURE PROJECTS

Project Sector Sub- Project Value Size Companies Status Construction
Name Sector Risk (USDmn) End
Metric
Moscow Roads Highway/ 8.4 8,860 729km ANAS [Construction]{Italy}, Avtodor Under 2024
(Central & motorway [Sponsor] {Russia}, Government of Russia construction
Federal bridges [Sponsor] {Russia}
District) -
Kazan
(Volga
Federal
District)
Highway
Project
Nevelskoy Rail Freight 5.6 10,000 7.6km Russian Railways [Sponsor] {Russia}, At planning 2035
Strait Government of Russia [Sponsor] {Russia} stage
Bridge
Moscow Rail Metro 7.6 17,072 na Mosinzhproekt [Construction] {Russia}, Under na

Metro Government of Moscow [Sponsor] construction
Expansion, {Russia}
Moscow
Region,
Central
Federal
District
Moscow Rail High 7.8 22,399 770km New Development Bank [Financier] Under 2024
(Moscow speed {China}, SOGAZ Insurance Group construction
Region, [Financier] {Russia}, Asian Infrastructure
Central Investment Bank [Financier] {China},
Federal China Railway Group [Construction]
District) - {China}, China Railway Eryuan
Project Sector Sub- Project Value Size Companies Status Construction

Name Sector Risk (USDmn) End
Metric
Kazan Engineering Group [Design/Architect]

(Republic {China}, Nizhegorodmetroproekt
of [Design/Architect] {Russia},
Tatarstan, Mosgiprotrans [Design/Architect]
Volga {Russia},Eurasian Development Bank
Federal (EBD) [Financier] {Kazakhstan}, Russian
District) Railways [Sponsor] {Russia}, Government
High of China [Sponsor] {China}, Government
Speed of Russia [Sponsor] {Russia}, China
Railway Railway International Group [Financier]
Project {China}
St. Rail High 5.4 25,825 659km Government of Russia [Sponsor] {Russia}, At planning 2026
Petersburg speed Knorr-Bremse [Equipment] {Germany}, stage
(North- Russian Railways [Sponsor] {Russia}
west
Federal
District) -
Nizhny
Novgorod
(Volga
Federal
District)
High
Speed Rail
Line, St.
Petersburg
- Moscow
Section
St. Rail High 5.3 35,999 1,080km Government of Russia [Sponsor] {Russia}, At planning 2026
Petersburg speed Knorr-Bremse [Equipment] {Germany}, stage
(North- Russian Railways [Sponsor] {Russia}
west
Federal
District) -
Nizhny
Novgorod
(Volga
Federal
District)
High
Speed Rail
Line
Note: Top projects by value. na = not available. Project Risk Metric scores out of 10; higher score = lower risk. Source: Fitch Solutions Infrastructure Key Projects Database
Energy & Utilities Infrastructure

Key View: Russia's energy and utilities infrastructure sector will suffer amid the continued economic implications of Russia's
invasion of Ukraine and Europe's shift away from a reliance on Russian energy imports.
Latest Developments
• There is significant downside risk facing the sector arising from the Russian invasion of Ukraine, which began in late February
2022. Western markets have responded swiftly with extensive sanctions and the exclusion of Russia from key international
payment systems. A number of investors are also divesting interests in Russian energy firms, with giants such
as Shell and BP rolling back investments. This will have a massive impact on investment in the energy sector.
• TVEL Fuel Company, a subsidiary of Russia's state-run firm Rosatom, has started the construction of a 300MW nuclear power
unit with the BREST-OD-300 fast neutron reactor at the site of the Siberian Chemical Combine in Seversk in the Russian region
of Tomsk, according to a press release from TVEL. The BREST-OD-300 is part of a pilot demonstration energy complex in the
framework of the Proryv project. A fuel production facility is due to be built by 2023, and the reactor is planned to start
operations in 2026.
• Rosatom's wind energy division VetroSGC-2 has secured approval for the construction of the Berestovskaya wind farm in
Russia, according to World Construction Network. The 60MW wind farm will come up in the Petrovskiy urban district of Stavropol
Krai. The project will feature 24 wind turbines of 2.5MW each. Overall, 180MW of wind farms are being built in Stavropol Krai.
• RusKhimAlyans, an equally owned joint venture between Gazprom and RusGasDobycha, has signed a contract with Linde
Engineering for the RusKhimAlyans natural gas processing complex in Ust-Luga, Russia. Under the agreement, Linde will
provide engineering, procurement and site services, including equipment and maintenance services for the complex. The
complex will feature liquefaction capacity of 13.0mn tonnes per annum. The complex is likely to produce 4.0mn tonnes per
annum of ethane and more than 2.2mn tonnes per annum of liquefied petroleum gas.
• TATNEFT and the Ministry of Energy have signed an investment agreement for the construction of new production facilities at
the TANECO refinery and petrochemical complex in Nizhnekamsk, Russia, according to a press release from TATNEFT. Under the
agreement, four new facilities will be constructed at an estimated cost of RUB50bn (USD653mn). The construction will include
delayed coking units, catalytic cracking units, heavy residue hydroconversion and isodewaxing diesel fuel. Construction of the
facilities is slated to be completed by the end of 2026.
• Gazpromneft-MNPZ has awarded South Korea-based DL E&C and its subsidiary Daelim RUS a USD290.7mn contract for
works on a new hydrocracking plant at its Moscow refinery in Russia. DL E&C will provide engineering, design and procurement
services. Daelim RUS will supervise procurement and construction activities for the new unit, which will be built as part of the
refinery's ongoing upgrade. Works under the contract are due to be delivered in three-and-a-half years, while the overall
RUB350.0bn (USD4.8bn) Moscow refinery upgrade is due to be completed in 2025.
• Lukoil-Nizhegorodnefteorgsintez, a subsidiary of Lukoil, has awarded a contract to Honeywell UOP to provide licence
technology for the expansion of the 17mn tonnes per annum Kstovo refinery in Russia, according to a press release from
Honeywell UOP. The expansion will include the installation of Honeywell's Ethermax unit to convert isobutylene and methanol
into a high-octane gasoline additive methyl tert-butyl ether (MTBE). The unit will produce more than 215,000 tonnes of MTBE
per annum. The project also includes the restoration of existing selective hydrogenation units and the process renovation study
of hydrofluoric alkylation units.
ENERGY AND UTILITIES INFRASTRUCTURE DATA (RUSSIA 2022-2031)

Indicator 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f
Energy and utilities infrastructure industry value real

-1.6 -2.2 2.1 2.1 2.0 1.9 1.9 1.9 1.9 1.9
growth, % y-o-y
Power plants and transmission grids infrastructure

-1.1 -1.7 1.5 1.5 1.4 1.3 1.3 1.3 1.3 1.3
industry value real growth, % y-o-y
Oil and gas pipelines infrastructure industry value real

-1.9 -2.4 2.3 2.3 2.2 2.2 2.2 2.2 2.2 2.2
growth, % y-o-y
Water infrastructure industry value real growth, % y-o-y 0.4 0.2 0.8 0.7 0.7 0.6 0.5 0.4 0.4 0.4
e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions
Structural Trends
Russia's energy and utilities infrastructure sector will suffer amid the continued economic implications of Russia's invasion of
Ukraine and Europe's shift away from a reliance on Russian energy imports. Within Russia’s power infrastructure sector, the
USD3.5bn Kursk II Nuclear Power Plant stands out as the largest power infrastructure project at significant risk of disruption as a
result of a reduction of Western firms' involvement, with French Framatome having been awarded a contract to manufacture and
install a reactor protection system for the plant by 2025. Multiple renewable energy projects are also at risk of being disrupted and
delayed by sanctions due to the involvement of EU companies. The wind power project pipeline is particularly at risk, including
several large-scale projects being developed by Enel Russia, a subsidiary of Italian Enel. These include the 201MW Kolskaya Wind
Farm Project, under construction in the Murmansk region, and the 71MW Rodnikovsky Wind Farm, being developed in the Stavropol
region.
Russia has seen recent progress on nuclear power-related developments. In September 2022, construction work started to build a
hull for the first of four floating nuclear power units. The unit forms part of the Cape Nagloynyn project and will be delivered
to Atomenergomash by the end of 2023. Atomflot will own and operate the floating nuclear power plant when it is complete. The
facility is scheduled to supply 105MW to a new port and the upcoming Baimskaya copper and gold mine by 2027.
Upside For Oil & Gas Pipelines From Arctic Expansion
Russia's ambitious push into the Arctic with the Vostok Oil project will serve as an upside for future oil and gas facilities and pipeline
construction. According to our Oil & Gas team, the project represents strong upside potential for Russia’s oil production over the
medium term, with estimates from Rosneft of 44bn barrels of liquids in place. Generous tax incentives have led to Rosneft investing
heavily in the project. Trafigura joined in late 2020, investing an unknown amount into the project for a 10% stake. Due to the
amount of capital required to start the project (an estimated USD64bn) and technological challenges in the Far North, Rosneft
would likely have to partner with an international oil company. It is unlikely that there will be many willing candidates given the US
administration’s increasingly tough stance on Russia. Rosneft may turn to investors from Mainland China and India instead.
The Vostok project connects the largest oil and gas fields in the north Krasnoyarsk Territory and creates an infrastructure system
capable of handling the huge volumes produced. The project has considerable financial support from the Kremlin, as it aligns with
the Kremlin’s desire to open up the Northern Passage for more months of the year to allow shorter shipping routes to lucrative
Asian markets, raising oil production. The tender for a contractor has been launched to build mooring points on both sides of the
Yenisey River and to build an additional reserve pipeline in Vankor, North Siberia. The new pipeline would reportedly transport oil to
ports in the Taymyr Peninsula. This project will be key to meeting the government's goal of shipping 80mn tonnes of oil through the
Northern Sea Route. Elsewhere, in July 2022, Rosneft has started the construction of an Arctic oil terminal at the Bukhta Sever port
in Russia. The terminal will be part of the Vostok Oil project, which will enable development of the Northern Sea Route. Rosneft plans
to tranship around 600,000 barrels of oil per day via the Bukhta Sever port per annum initially with a gradual increase to 100.0mn
tonnes by 2030.
Oil And Gas Accounting For Bulk Of Industry Value

Russia - Energy & Utilities Infrastructure Value By Sector, RUBbn (2021-2031)
e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions
Investment from Gazprom in recent years has been supportive of finishing the construction of the Power of Siberia gas pipeline, the
Sakhalin-Khabarovsk-Vladivostok gas pipeline, and the implementation of the Nord Stream 2 and TurkStream projects. These
projects form the crux of the company’s strategic push into China and Turkey and also diversify European export options.
Construction on the Power of Siberia-2 pipeline is likely to start in 2024, and will deliver gas from western Siberian fields to China.
The 2,600km-long pipeline has planned capacity of 50bn cubic meters. The project is expected to be operational in 2030.
The instigation of the company’s next project cycle will see investment focus on ensuring gas exports to China as well as the
development of the Northern Corridor and the Yamal fields. There will also be greater focus on building out liquid natural gas export
capacity.
The emergence of Asia a key destination for energy imports should spur and expansion of infrastructure directed east. The
reorientation of pipeline gas from Europe to Asia will take several years to develop but markets in China will be the obvious pivot for
gas flows as a rebound in European trade is unlikely to ever achieve the same volume of flows prior to the invasion. As Europe
permanently diversifies from Russian gas via expanded renewables and LNG imports, China will provide a ready market for natural
gas once additional infrastructure is built. However, China’s push towards greater energy security through domestic development
may limit Russia’s upside potential, decreasing the capital expenditure targeting markets east in the future.
Limited But Improving Prospects For Renewable Energy Deployment
Growth in Russia’s power plants and transmission grids sub-sector will remain sluggish over the next decade, with an average annual
real growth rate of 1.4% between 2022 and 2031. While we note growing activity in wind and solar project investment in Russia, we
have not factored this investor interest into our forecasts due to multiple false starts in Russia’s renewables space. For example,
successive Russian renewables capacity auctions between 2013 and 2015 failed to progress as expected despite the relatively small
capacity being auctioned. The fact that these failed to deliver, combined with the broader infrastructure landscape being adversely
affected by international sanctions, creates uncertainty regarding whether or not developments in renewable capacity will move
ahead in the medium term.
Opportunities for Green Hydrogen Adoption
Russia has significant potential to develop hydrogen infrastructure due to its extensive oil and gas production activities and the
country's associated expertise and infrastructure. The renewable energy sector is expected to outperform over the coming years,
although it is growing from a very low base. There are a number of projects in the pipeline. In November 2020, NovaWind JSC
started construction on the 120MW Bondarevskaya wind farm in the Stavropol Krai region - part of plans to build 1GW of wind farms
by 2023. We also note that the market is looking to tap into the low-carbon hydrogen export market, utilising its vast pipeline
networks to export products to the EU and Asia. Current support for low-carbon hydrogen is being given to other methods,
including blue (utilising natural gas and carbon capture) and storage or purple (a nuclear-based electrolyser coupled system). In
Q420, Russian Deputy Minister of Energy Pavel Sorokin unveiled a new government policy to export 2mn tonnes of hydrogen by
2035, representing 2.5% of the current global market.
Our Power & Renewables team notes that Russia's renewable energy sector presents elevated risks. The high level of state
involvement in the Russian power sector, which limits competition, is a key factor dragging down the country's renewables
potential. Barriers to the participation of foreign banks in the country's financial sector further weigh on its profile.
RUSSIA - MAJOR ENERGY & UTILITIES INFRASTRUCTURE PROJECTS

Project Name Sector Sub Sector Project Value Size Companies Status Construction
Risk (USDmn) End
Metric
Arkhangelsk Wind Power Wind - 8.2 500 200MW sowitech [Sponsor] Under na
Farm Project, Stage- plants & onshore {Germany}, construction
I, Arkhangelsk grids Mezhregionsoyuzenergo
Region, North-west [Sponsor] {Russia}
Federal District
Zagorskaya-2 Power Hydropower 7.7 1,168 840MW RusHydro [Sponsor] {Russia} Under 2024
Pumped Storage plants & construction
Plant, Sergiev grids
Posad, Moscow
Region, Central
Federal District
Kaliningrad Coal- Power Coal 5.1 2,000 800MW Inter RAO UES [Operator] At planning na
Fired Power Plant, plants & {Russia} stage
North-west Federal grids
District
Kursk II Nuclear Power Nuclear 7.5 3,412 2,500MW Rosatom [Sponsor] {Russia}, Under 2025
Power Plant, plants & Framatome [Construction] construction
Moscow grids {France}
Power of Siberia Oil & gas na 7.3 17,229 38bn cu Gazprom [Sponsor] {Russia}, Under na
Pipeline pipelines m gas PJSC Stroytransgaz construction
per year [Construction] {Russia},
China National Petroleum
Corporation (CNPC)
[Sponsor] {China}
Note: Top five projects by value. na = not available. Project Risk Metric scores out of 10; higher score = lower risk. Source: Fitch Solutions Infrastructure Key Projects Data
Residential/Non Residential Building

Key View: Russia's residential and non-residential building industry will contract in 2022, as the impact of base effects in 2021
alleviate and the economic impact of Russia's invasion of Ukraine ensues. Over the long term, the sector should perform moderately
well, displaying an average growth rate of 0.7% over the 2022-2031 forecast period.
Latest Developments
• Maire Tecnimont subsidiaries Tecnimont and MT Russia signed a contract with Rosneft for the engineering, procurement
and construction works on a Vacuum Gas Oil Hydrocracking unit at Ryazan Refining's refinery near Moscow. The overall
contract is estimated to cost around USD1.4bn. The proposed unit will have a capacity of 40,000b/d of oil.
• As of September 2022, Yandex has unveiled plans to construct a data centre in the Kaluga oblast, Russia. The proposed facility
will come up on a 130,000sq m area in the Grabtsevo industrial park in Kaluga. The facility will have the capacity to produce
63MW of IT power and will feature more than 3,800 server racks with a load of 15kW each. Operations for the facility are slated to
begin in H223.
• Lukoil and the government of Perm region in Russia have signed a memorandum of understanding for the construction of a
new catalytic cracking complex at Lukoil-Permnefteorgsintez's 13.1mn tonnes per annum refinery in the region. The proposed
complex, which will be located on the northern bank of the Kama River, will feature a 1.8mn tonnes per annum catalytic cracking
unit, a unit for production of high-octane gasoline components and associated off-site installations. The entire complex should
be operational by 2026.
• Gazprom has started construction on a complex for processing ethane-containing gas in Leningrad Region. The facility includes
the construction of an integrated gas processing complex (GPC), which will be operated by RusKhimAlyans (a joint venture of
Gazprom and RusGazDobycha). It will also have a gas chemical complex associated with the GPC, which will be operated
by Baltic Chemical Complex. GPC is expected to process 45mn cubic metres of gas per annum and produce 13mn tonnes per
annum of liquefied natural gas.
• TATNEFT and the Ministry of Energy have signed an investment agreement for the construction of new production facilities at
the TANECO refinery and petrochemical complex in Nizhnekamsk, Russia, according to a press release from TATNEFT. Under the
agreement, four new facilities will be constructed at an estimated cost of RUB50bn (USD653mn). These facilities will include
delayed coking units, catalytic cracking units, heavy residue hydroconversion and isodewaxing diesel fuel. Construction of the
facilities is slated to be completed by the end of 2026.
• Gazpromneft-MNPZ has awarded South Korea-based DL E&C and its subsidiary Daelim RUS a USD290.66mn contract for
works on a new hydrocracking plant at its Moscow refinery in Russia. DL E&C will provide engineering, design and procurement
services. Daelim RUS will supervise procurement and construction activities for the new unit, which will be built as part of the
refinery's ongoing upgrade. Works under the contract are due to be delivered in three-and-a-half years, while the overall
RUB350.0bn (USD4.8bn) Moscow refinery upgrade is due to be completed in 2025.
• The energy storage division of Russia's state-owned Rosatom plans to build a factory for lithium-ion cells and energy storage
systems in Russia, according to a press release from the firm. The development follows Rosatom acquiring a 49% stake in South
Korea-based battery firm Enertech International. RENERA plans to build the facility, which will have a capacity of at least
2GWh, by 2030. The first stage of production is slated to begin in 2025, and the batteries will be used in electric vehicles, special
equipment and power grids.
RESIDENTIAL AND NON-RESIDENTIAL BUILDING INDUSTRY DATA (RUSSIA 2021-2031)

Geography Indicator 2021e 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f
Residential and non-residential

Russia building industry value real growth 11.9 -9.6 -8.6 -0.6 1.0 0.1 2.8 3.0 3.2 2.5 3.2
(%)
Structural Trends
After robust growth of 11.9 y-o-y in 2021, amid positive base effects following the Covid-19 pandemic, Russia's residential and non-
residential building industry will contract in 2022, amid the economic implications of Russia's invasion of Ukraine. Specifically, the
market is forecast to contract by 9.6% y-o-y in 2022 and 8.6% y-o-y in 2023. A government focus on social construction (via its
Housing For Russian Families Programme that aims to decrease the cost of housing) is a factor that will support growth in the sector
over the medium term. In the long term, we expect the residential and non-residential building sector to recover and perform
relatively well, growing on average by 0.7% y-o-y over 2022-2031.
Buildings Sector Growth In Line With Wider Construction Sector

Russia - Construction, Residential & Non-Residential Building Industry Value Real Growth, % y-o-y (2020-2026)
The pandemic has caused Russia to provide fiscal stimulus to households. Budget priorities will increasingly focus on the social
sphere, providing momentum to the recovery in the household sector. The sector has seen stagnating incomes since Russia’s
annexation of Crimea in 2014, largely due to the impact of Western sanctions and greater fiscal consolidation to increase
macroeconomic stability and rebuild fiscal buffers.
Buildings Sector Accounting For Sizable Proportion Of Overall Construction

Russia - Construction, Residential & Non-Residential Building Industry Value, RUBbn (2021-2031)
Given the anticipated increase in spending on social policy, the need to return to a more cautious fiscal policy will result in
reductions in state investment spending over the coming quarters and pose a downside risk to public housebuilding activity. Falling
revenue and large war-related expenditure will cause Russia’s fiscal accounts to deteriorate over the coming months, slumping into
a RUB1.9trn (USD32bn) deficit by the end of 2022. Additionally, we note that the Ministry of Finance has stopped publishing a
breakdown of its spending, so it is impossible to see how much is being allocated to various areas of public expenditure.
Industry Risk/Reward Index

Russia Infrastructure Risk/Reward Index
Key View: Russia ranks 10th in our Infrastructure Risk/Reward Index for Central and Eastern Europe, scoring 47.7. The economic
implications of Russia's invasion of Ukraine have dramatically reduced the market's relative attractiveness, despite the large size of
its construction market relative to the region.
Risk/Reward Snapshot
Russia & CEE Region Infrastructure Risk/Reward Index
Global And Regional Ranks
• Global rank (out of 104): 63rd

• Regional rank (out of 19): 10th
Key Features And Latest Updates
• Russia’s performance in our Risk/Reward Index remains relatively weak at 47.7. However, this still places the market above both
the global and regional averages of 50.0 and 46.5 respectively. The economic implications of Russia's invasion of Ukraine have
dramatically reduced the market's relative attractiveness, despite the large size of its construction market relative to the region.
relations with the West and dragging the country into a prolonged frozen conflict.
• Russia scores well in terms of Country Rewards, due to its population size and demographics serving the country’s prospects.
Industry Rewards are dragged down by underwhelming construction industry real growth, despite the large size of Russia’s
construction industry value.
• The presence of high legal risk and prevalent corruption remains a concern for many investors. With Russian firms dominant in
construction, the sector remains undiversified and unattractive relative to the wider Central and Eastern Europe (CEE) region.
Risk/Reward Matrix Breakdown

Russia & Central & Eastern Europe Region - Infrastructure Risk/Reward Index, By Component
Central And Eastern Europe Infrastructure Risk/Reward Index:

Economic Pressures Weakening Scores
Key View
• Central and Eastern Europe scores an average of 46.5 out of 100 in our Infrastructure Risk/Reward Index, slightly below the
global average of 50.0, with the region standing as the fourth strongest scoring region globally.
• Political disputes with EU authorities, namely in Poland and Hungary, continue to weigh on their respective Risk/Reward Index
scores, though we expect the ultimate unlocking of EU recovery funding to benefit both markets in the medium term.
• The economic implications of Russia's invasion of Ukraine continue to detrimentally affect the region's performance, beyond
solely Ukraine and Russia, given the escalation in construction input costs that the conflict has caused.
Varied Scores Across Region

Central & Eastern Europe – Infrastructure RRI
Note: Scores out of 100; higher score = lower risk. Source: Fitch Solutions Infrastructure Risk/Reward Index
Main Regional Features And Latest Updates
• Central and Eastern Europe (CEE) exhibits an average Infrastructure Risk/Reward Index (RRI) score of 46.5 out of 100 this
quarter, placing it largely in line with the global average of 50.0 and making it the fourth most attractive region in our RRI, behind
North America and Western Europe, Asia-Pacific, and the Middle East and North Africa.
• Poland, the Czech Republic and Kazakhstan stand as the highest scoring markets in the region, all scoring well above both the
global and regional averages.
• Russia's invasion of Ukraine and its severe implications for project activity in both markets has resulted in their respective RRI
scores falling this quarter, with Russia and Ukraine now exhibiting RRI scores of 47.7 and 30.7 respectively.
Numerous Low-Risk Markets In Region

CEE – Infrastructure RRI By Component
Note: The Rewards and Risks components are weighted 60% and 40% respectively in the final RRI score. Source: Fitch Solutions Infrastructure Risk/Reward Index
EU Infrastructure Funding Set To Provide Upside Once Disputes Are Resolved
EU member markets in CEE will continue to see their Rewards component of our RRI remain relatively attractive, amid continued
disbursement of the EU's EUR750bn Next Generation EU recovery funding. Weighted 60% in the final RRI score, the Rewards
component encompasses Industry Rewards and Country Rewards; the former evaluates an industry's size and growth potential,
while the latter quantifies a market's macroeconomic characteristics that directly impact the size of the market's business
opportunities. CEE scores an average of 43.1 on its Rewards component, just below the global average of 50.0.
In June 2022, the European Commission (EC) endorsed Poland's EUR35bn Recovery and Resilience Plan. This followed a European
Court of Justice ruling in February 2022 that effectively enabled the EC to continue withholding Recovery and Resiliency Funds from
Hungary and Poland in order to uphold rule-of-law principles. The endorsement follows concessions from Poland to reform its
disciplinary regime for Polish judges, which the EC viewed as undermining the rule of law and thus the investment climate in Poland.
Despite the EU's endorsement, as of October 2022, the EU has yet to advance any of Poland's recovery funding allocation, with the
EU citing that it would require demonstration that Poland's rule of law concessions have taken effect. While we expect the EU to
disburse the funding, this indicates that the funding's impact on infrastructure activity will take longer to materialise.
Less promising, however, are developments regarding the disbursement of Hungary's EUR15bn Recovery and Resilience Plan. The
EU is yet to endorse the market's plan at the time of writing, though we expect Hungarian authorities to provide similarly satisfactory
concessions to Poland and enable the disbursement of EU funding. We expect limited reform in Hungary regarding public
procurement to lead to the dispersal of currently withheld funds. However, we do not expect more comprehensive reforms to be
implemented, and we believe that this will result in the loss of the EUR7.5bn of cohesion funding, which the EC recommended
suspension of under rule of law proceedings on September 18 2022.
Numerous Markets Below Global Average

Central & Eastern Europe - Infrastructure Risk/Reward Index
Russia's Invasion Of Ukraine Continues To Overshadow Region's Prospects
Russia's invasion of Ukraine in early 2022 and its impact on the global macroeconomic environment continues to dampen near-
term construction industry real growth across the region, placing pressure on the Risks component of our RRI; primarily by fuelling
already high construction input costs globally and placing pressure on the feasibility of construction activity. The Risks component
of our RRI is weighted 40% in the final RRI score. It encompasses Industry Risks and Country Risks in a given market by taking into
account factors including the openness of a market's competitive landscape, the risk of project delays and its broader legal
environment. CEE scores an average of 51.7 on its Risks component, above the global average of 50.0.
Regarding notable upcoming political events that could reshape the outlook for Risks in the region, we highlight
Turkey's presidential and parliamentary elections due by June 18 2023. Our Country Risk team's core view is that current President
Recep Tayyip Erdoğan will win the presidency, but the ruling Justice and Development Party will lose its parliamentary majority.
Construction activity continues to face a precarious operating environment, irrespective of the election’s outcome, having suffered
successive annual real growth contractions over 2018-2021. The sector remains acutely exposed to escalating construction input
costs, with Turkey's statistical authority estimating that the sector's construction cost index increased by 117% y-o-y as of August
2022. Erdoğan's propensity to utilise ambitious, large-scale infrastructure projects to fuel economic activity provides a degree of
upside for the sector's growth trajectory, as exemplified by the Canal Istanbul project and the 2053 Transport and Logistics Master
Plan.
CENTRAL AND EASTERN EUROPE - INFRASTRUCTURE RISK/REWARD INDEX

Industry Country Industry Country Regional Global
Rewards Risks RRI
Rewards Rewards Risks Risks Rank Rank
Poland 55.0 51.8 53.7 56.7 63.5 60.1 56.3 1 36
Czech Republic 39.8 50.9 44.2 67.4 75.9 71.6 55.2 2 39
Kazakhstan 48.5 52.6 50.2 57.6 56.1 56.9 52.8 3 43
Slovenia 50.2 35.9 44.5 48.4 79.2 63.8 52.2 4 47
Estonia 28.5 44.1 34.7 72.0 78.6 75.3 51.0 5 50
Hungary 46.0 47.0 46.4 50.7 62.4 56.5 50.4 6 52
Romania 47.6 43.9 46.1 62.5 47.4 55.0 49.6 7 56
Lithuania 29.8 38.6 33.3 72.8 71.4 72.1 48.8 8 58
Turkey 47.4 65.4 54.6 47.5 30.7 39.1 48.4 9 59
Russia 46.0 52.2 48.5 55.2 37.8 46.5 47.7 10 63
Latvia 40.5 30.9 36.6 58.9 60.4 59.6 45.8 11 66
Uzbekistan 59.2 50.1 55.6 33.6 23.0 28.3 44.7 12 70
Bulgaria 29.4 42.9 34.8 60.8 56.0 58.4 44.3 13 74
Croatia 37.5 37.7 37.6 45.0 61.7 53.3 43.9 14 75
Turkmenistan 52.4 49.5 51.3 29.3 28.7 29.0 42.4 15 78
Slovakia 28.2 34.2 30.6 44.6 67.5 56.0 40.7 16 82
Bosnia-
44.0 30.5 38.6 26.2 19.7 23.0 32.4 17 92
Herzegovina
Ukraine 25.6 46.2 33.8 38.1 14.1 26.1 30.7 18 94
Global average 50.0 50.0 50.0 50.0 50.0 50.0 50.0 ~ ~
Regional average 42.0 44.7 43.1 51.5 51.9 51.7 46.5 ~ ~
CENTRAL AND EASTERN EUROPE - INFRASTRUCTURE INDUSTRY REWARDS

Construction Industry Construction Industry Real Project Pipeline, % of Industry Industry
Value Growth Value Rewards
Poland 83.5 48.5 33.0 55.0
Czech Republic 61.2 46.6 11.7 39.8
Kazakhstan 52.4 77.7 15.5 48.5
Slovenia 24.3 52.4 73.8 50.2
Estonia 16.5 58.3 10.7 28.5
Hungary 46.6 70.9 20.4 46.0
Romania 66.0 40.8 35.9 47.6
Lithuania 31.1 17.5 40.8 29.8
Turkey 76.7 8.3 57.3 47.4
Russia 87.4 1.9 48.5 46.0
Latvia 18.4 55.3 47.6 40.5
Uzbekistan 36.9 86.4 54.4 59.2
Bulgaria 26.2 23.3 38.8 29.4
Croatia 23.3 29.1 60.2 37.5
Turkmenistan 35.9 89.3 32.0 52.4
Slovakia 41.7 28.2 14.6 28.2
Bosnia-
10.7 33.0 88.3 44.0
Herzegovina
Ukraine 38.8 0.0 37.9 25.6
Global average 50.0 50.0 50.0 50.0
Regional
43.2 42.6 40.1 42.0
average
CENTRAL AND EASTERN EUROPE - INFRASTRUCTURE COUNTRY REWARDS

GDP Per Urban Population, % of Population GDP Per Capita Country
Population
Capita Total Growth Growth Rewards
Poland 66.0 64.1 37.9 11.7 79.6 51.8
Czech Republic 72.8 39.8 56.3 19.4 66.0 50.9
Kazakhstan 51.5 49.5 31.1 55.3 75.7 52.6
Slovenia 75.7 3.9 30.1 15.5 54.4 35.9
Estonia 77.7 1.0 49.5 8.7 83.5 44.1
Hungary 60.2 34.0 53.4 9.7 77.7 47.0
Romania 61.2 46.6 27.2 5.8 78.6 43.9
Lithuania 70.9 6.8 44.7 1.0 69.9 38.6
Turkey 48.5 84.5 62.1 35.0 97.1 65.4
Russia 52.4 92.2 57.3 12.6 46.6 52.2
Latvia 65.0 1.9 43.7 0.0 43.7 30.9
Uzbekistan 15.5 61.2 20.4 65.0 88.3 50.1
Bulgaria 55.3 26.2 60.2 1.9 70.9 42.9
Croatia 63.1 12.6 32.0 3.9 76.7 37.7
Turkmenistan 47.6 24.3 26.2 67.0 82.5 49.5
Slovakia 67.0 18.4 24.3 16.5 44.7 34.2
Bosnia-
44.7 9.7 21.4 7.8 68.9 30.5
Herzegovina
Ukraine 26.2 67.0 50.5 2.9 84.5 46.2
Global average 50.0 50.0 50.0 50.0 50.0 50.0
Regional
56.7 35.8 40.5 18.9 71.6 44.7
average
CENTRAL AND EASTERN EUROPE - INFRASTRUCTURE INDUSTRY RISKS

Infrastructure Competitive Construction - Construction - Legal Labour Industry
Landscape Timeliness Contracts Environment Market Risk Risks
Poland 71.8 51.5 49.5 51.5 59.2 56.7
Czech
51.0 73.8 74.3 71.8 66.0 67.4
Republic
Kazakhstan 33.5 69.9 47.6 47.6 89.3 57.6
Slovenia 33.5 50.5 32.0 66.0 60.2 48.4
Estonia 71.8 85.4 44.7 84.5 73.8 72.0
Hungary 71.8 46.6 30.1 48.5 56.3 50.7
Romania 51.0 54.4 85.4 58.7 63.1 62.5
Lithuania 71.8 64.1 88.3 69.9 69.9 72.8
Turkey 71.8 44.7 42.2 33.0 45.6 47.5
Russia 51.0 55.3 67.0 24.3 78.6 55.2
Latvia 51.0 47.6 58.3 65.0 72.8 58.9
Uzbekistan 2.9 56.8 27.7 28.2 52.4 33.6
Bulgaria 71.8 61.2 68.0 41.7 61.2 60.8
Croatia 71.8 26.2 37.4 42.7 46.6 45.0
Turkmenistan 2.9 56.8 27.7 19.4 39.8 29.3
Slovakia 33.5 34.0 59.2 53.4 42.7 44.6
Bosnia-
71.8 13.6 19.4 6.8 19.4 26.2
Herzegovina
Ukraine 18.4 53.4 46.6 13.6 58.3 38.1
Global
50.0 50.0 50.0 50.0 50.0 50.0
average
Regional
50.2 52.5 50.3 45.9 58.6 51.5
average
CENTRAL AND EASTERN EUROPE - INFRASTRUCTURE COUNTRY RISKS

Long Term
Short Term Long Term Political Short Term Political Operational Country
Economic Risk
Economic Risk Index Risk Index Risk Index Risk Index Risks
Index
Poland 71.8 53.4 72.3 45.6 68.9 63.5
Czech
76.7 56.3 94.2 76.7 75.7 75.9
Republic
Kazakhstan 45.6 51.5 57.3 68.0 57.3 56.1
Slovenia 92.2 90.3 83.5 65.5 71.8 79.2
Estonia 91.3 76.7 86.4 69.4 73.8 78.6
Hungary 70.9 43.2 61.2 70.9 64.1 62.4
Romania 47.6 28.2 56.3 26.2 63.1 47.4
Lithuania 79.6 66.5 78.6 62.1 70.9 71.4
Turkey 32.0 11.2 19.4 22.8 49.5 30.7
Russia 74.8 25.2 17.5 14.1 47.6 37.8
Latvia 57.3 44.7 74.8 55.3 65.0 60.4
Uzbekistan 12.6 6.8 26.2 34.0 29.1 23.0
Bulgaria 59.2 50.5 64.1 37.9 62.1 56.0
Croatia 63.1 66.5 65.0 59.2 58.3 61.7
Turkmenistan 14.1 18.4 15.5 77.7 23.3 28.7
Slovakia 73.8 71.8 80.6 58.3 60.2 67.5
Bosnia-
20.9 5.8 23.3 6.3 31.1 19.7
Herzegovina
Ukraine 7.8 1.0 4.9 4.9 33.0 14.1
Global
50.0 50.0 50.0 50.0 50.0 50.0
average
Regional
55.1 42.7 54.5 47.5 55.8 51.9
average
Note: Our Risk/Reward Indices are updated frequently; as a result, scores in this section may not match scores in the rest of the
report.
Competitive Landscape
Russia’s construction competitive landscape is characterised by the significant presence of domestic contractors occupying
construction roles in the sector, alongside a small but growing number of Chinese contractors. With the Russian industry remaining
a high-risk area for foreign private financing to enter, its construction sector remains reliant on domestic financing, particularly from
state-owned institutions, including Sberbank, Vnesheconombank (VEB) and the Eurasian Development Bank (EDB).
Russia’s construction sector is dominated by large, well-established domestic players with the capacity to undertake numerous
construction roles in major projects. Data from our Key Projects Database show Russian construction firms occupying close to 63%
of all construction roles in the country’s project pipeline, with Chinese contractors occupying 18% of such roles. VAD,
Transstroymekhanizatsiya and Mosinzhproekt are the most active domestic contractors in terms of the number of current
construction roles being undertaken. VAD and Transstroymekhanizatsiya are active in road infrastructure projects, particularly
highways. VAD is involved in the reconstruction works on the A-181 Scandinavia Highway, the road connecting Saint Petersburg
with the Russia-Finland border. PIK Group and Morton Group are active in residential and real estate construction.
Considering the small number of foreign contractors in the sector, China Railway Construction Corporation (CRCC) and China
Poly Group maintain a presence in Russia.
The prevalence of corruption and high legal risk, combined with international sanctions on Russia’s economy, has ensured that
project financing in the country’s project pipeline remains undiversified and concentrated on domestic financiers. Russian financiers
occupy around 45% of the financier roles in the construction sector’s project pipeline, with 21% of such roles being held by Chinese
entities. Sberbank, VEB and Gazprombank are key finance players in the sector.
While the imposition of sanctions by the US and the EU has heightened investor caution towards Russian assets, Mainland China
has used this gap in the sector to gain a growing number of financier and construction roles. Mainland China is in a position to exert
influence over the sector and further its ambitions for large-scale infrastructure projects. The successful establishment of state-
owned enterprises in construction roles in Russia’s construction sector (such as CRCC, China Poly Group and China Railway)
makes the pursuit of large-scale projects more attainable for Mainland China’s Belt and Road Initiative. These projects include the
2,000km Meridian Highway (set to stretch from Belarus to Kazakhstan via Russia) and the 1,120km Power of Siberia Pipeline (which
would be one of the largest projects globally).
Company Profile
Mostootryad No.19
Strengths Weaknesses
• Strong alliances with major foreign companies. • Erratic growth in revenue and net profits since 2006.
• Mostootryad No.19 was part of the consortium that built • More than half of infrastructure funding in Russia comes
and the Western High Speed Diameter in Saint Petersburg. directly from the government, much of which is dependent on
• One of the largest construction companies in Russia. oil and gas prices.
Opportunities Threats
• The construction and infrastructure sectors in Russia have • Russia is emerging from recession, but its long-term growth
significant potential, with major projects across all potential is subdued and is closer to that of mature developed
construction sub-sectors. economies rather than a higher growth emerging market. This
• The ongoing presence of sanctions will limit foreign will negatively impact construction firms operating in the
competition. country.
Company Overview
Mostootryad No. 19 is a Russian construction company based in St Petersburg. It was established in 1941 and focuses on the
construction of transport infrastructure in Russia.
Activities And Projects
Mostootryad No.19 has cemented its position as one of the pre-eminent players in the Russian infrastructure market. Major projects
completed include the Obukhovsky Bridge and parts of the Moscow Ring Road. It was previously successful in winning the Western
High-Speed Diameter public-private partnership (PPP) contract. The company won the contract as part of the international
consortium WHSD-Nevskij Meridian, led by Germany-based Hochtief and France-based Bouygues. At RUB213bn (USD7bn), it
remains one of the largest transport PPPs in the Russian market.
Infrastructure Methodology
Connected Thinking
We use a simple and transparent forecasting model as a base for our industry forecasts, but rely heavily on our analysts' expert
judgement to ensure our forecasts capture all of the insights we derive using our unique Connected Thinking approach. We believe
analyst expertise and judgement are the best ways to provide the most accurate, up-to-date and comprehensive insight to our
customers.
Our Connected Thinking approach to forecasting and analysis integrates macroeconomic variables from Fitch Solutions Country
Risk to provide our customers with unique and valuable insight on all relevant macroeconomic, political and industry risk factors
that will impact their operations and revenue-generating potential in the industry/industries they operate in.
Infrastructure Methodology
Our data and forecasts capture the entire spectrum of construction activities, including all areas of civil engineering and building
construction, as defined under the ISIC Rev.4.
Our data and forecasts for Infrastructure are broken down into: transport (road, rail, ports and airports) and energy & utilities (power
plants & transmission grids, water, oil & gas pipelines). Our building data and forecasts are broken down into residential and non-
residential construction.
Construction Industry
Construction Industry Value
Our construction data is derived from national accounts from each market's national statistics office (or equivalent). Specifically, it
measures the gross value added of the construction industry over the reported 12-month period in nominal values.
It is a measure of net value added within the industry, ie, the output of the construction industry, less the value of all inputs,
including labour and capital. The value metric here should not be equated with spending or with gross output, which for most
markets would significantly increase the overall figure. Furthermore, it is important to note that the data does not provide an
indication of the total value of a market's buildings, only the construction sector's output in a given year.
This data is used because it is reported by virtually all markets and can therefore be used for comparative purposes.
Construction Industry Value Real Growth
Our construction industry value forecasts are based on a regression model, using a market's own historical time series and key
macroeconomic variables, such as gross fixed capital formation, from Fitch Solutions Country Risk.
In addition, we will also apply analyst expert judgement to refine and finalise our construction industry value real growth forecast,
based on exogenous and endogenous variables or events, not captured by our regression model. Real growth is defined as industry
value nominal growth adjusted for sector-specific inflation (construction deflator).
Bearing in mind that other factors need to be taken into consideration, both quantitative and qualitative, our analysts also factor in
sector-specific issues in deriving our forecasts:
• Political risk - potential change in leadership, policy continuity

• Regulatory outlook - pricing structures of specific markets, bureaucracy, red tape
• Currency outlook - currency volatility, cost of imports
• Funding availability - fiscal health of the government, openness to private/foreign investment
• Fitch Solutions Key Projects Database - indication of a market's infrastructure project pipeline by sector
• High Frequency Data – construction permits, starts, confidence etc
• Company developments - reflective of market dynamics and competitive landscape
Construction Industry, % Of GDP/Construction Value (USD)
These are derived indicators. We use the Fitch Solutions Country Risk team's GDP and exchange rate forecasts to calculate these
indicators.
Cement Forecast
Fitch Solutions forecasts Portland cement production (including imported clinker), consumption and net exports, in millions of
tonnes.
Our historical national production data is sourced from the United States Geological Survey (USGS), while trade data is sourced from
TradeMap by the International Trade Centre. By calculating production and net exports, we are able to determine historical
consumption levels.
These consumption levels are then forecast over our 10-year forecast period using our construction growth forecasts, reflecting the
changing demand picture for cement from the industry.
Construction Sector Employment
Total Construction Employment
This data is sourced from either the national statistics office or the International Labor Organization. It includes all those employed
within the sector.
Our total construction employment forecasts are based on a regression model, using a market's own historical time series and key
macroeconomic variables from Fitch Solutions Country Risk.
Infrastructure Data Sub-Sectors
Infrastructure Data Sub-Sectors
Fitch Solutions infrastructure data examines the industry from the top down and bottom up in order to calculate the industry value
of infrastructure and its sub-sectors. Our construction industry value is broken down into transport, energy and utilities, residential
building and non-residential building. We use a combination of historic data as reported by the central banks, national statistics
agencies and other official data sources, and Fitch Solutions' Infrastructure Key Projects Database, a comprehensive catalogue of
the major power, transport, utilities, residential and non-residential projects in each market.
Where possible we source historic data for the relative portion of either infrastructure spend or value generated by the various sub-
sectors we classify as infrastructure. There is no industry standard set of definitions for infrastructure classifications. Therefore, we
segment official infrastructure data into consistent and proprietary categories to compare industry value across sub-sectors.
In those instances where historic data is not available, we use a top down and bottom up approach incorporating full use of
the Fitch Solutions Infrastructure Key Projects Database, in most cases dating back to 2005. This allows us to calculate historical
ratios between general infrastructure industry value and its sub-sectors, which we then use for forecasting. Our Key Projects
Database is not exhaustive, but it is sufficiently comprehensive to provide a robust foundation for our calculations.
Our infrastructure sub-sectors industry value forecasts are based on a regression model, using a market's own historical time series
and key macroeconomic variables, such as fixed capital formation, from Fitch Solutions Country Risk.
In addition, we will also apply analyst expert judgement to refine and finalise industry value real growth forecast, based on
exogenous and endogenous variables or events, not captured by our regression model.
The residential and non-residential industry values are a function of construction minus infrastructure industry value. We further rely
on national sources and our Key Projects Database to further estimate the separation between the two areas of building when
historic data is not available.
Infrastructure Risk/Reward Index
Our Infrastructure Risk/Reward Index (RRI) quantifies and ranks a market's attractiveness within the context of the Infrastructure
industry, based on the balance between the Risks and Rewards of entering and operating in different markets.
We combine industry-specific characteristics with broader economic, political and operational market characteristics. We weight
these inputs in terms of their importance to investor decision-making in a given industry. The result is a nuanced and accurate
reflection of the realities facing investors in terms of 1) the balance between opportunities and risk; and 2) between sector-specific
and broader market traits. This enables users of the index to assess a market's attractiveness in a regional and global context.
The index uses a combination of our proprietary forecasts and analyst assessment of the regulatory climate. As regulations evolve
and forecasts change, so the index scores change providing a highly dynamic and forward-looking result.
The Infrastructure Risk/Reward Index universe comprises 104 markets.
Benefits Of Using Fitch Solutions' Infrastructure RRI
• Global Rankings: One global table, ranking all the markets in Fitch Solution's universe for Infrastructure from least (closest to
zero) to most attractive (closest to 100).
• Accessibility: Easily accessible, top down view of the global, regional or sub-regional Risk/Reward profile.
• Comparability: Identical methodology across 105 markets for Infrastructure allows users to build lists of markets they wish to
compare, beyond the confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
favourable the market profile.
• Quantifiable: Quantifies the Rewards and Risks of doing business in the Infrastructure sector in different markets around the
world and helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic and
operating risks.
• Entry Point: A starting point to assess the outlook for the Infrastructure sector, from which users can dive into more granular
forecasts and analysis to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
• Methodology is a combination of proprietary Fitch Solutions forecasts, analyst insights and globally acceptable benchmark
indicators (example: Transparency International's Corruption Perceptions Index).
Weightings Of Categories And Indicators
The RRI matrix divides into two distinct categories:
Rewards: Evaluation of an industry's size and growth potential (Industry Rewards), and macro characteristics that directly impact
the size of business opportunities (Country Rewards).
Risks: Evaluation of micro, industry-specific characteristics, crucial for an industry to develop to its potential (Industry Risks) and a
quantifiable assessment of the political, economic and operational profile (Country Risks).
Our matrix is deliberately overweight on Rewards (60% of the final RRI score for a market) and within that, the Industry Rewards
segment (60% of final Rewards score). This is to reflect the fact that when it comes to long-term investment potential, industry size
and growth potential carry the most weight in indicating opportunities, with other structural factors (demographic, labour statistics
and infrastructure availability) weighing in, but to a slightly lesser extent. In addition, our focus and expertise in emerging and frontier
markets has dictated this bias towards industry size and growth to ensure we are able to identify opportunities in markets where
regulatory frameworks are not as developed and industry sizes not as big (in USD terms) as in developed markets, but where we
know there is a strong desire to invest.
Fit
Fitch
ch Solutions, 30 North C
Colonnade
olonnade,, Canary W
Wharf
harf,, L
London.
ondon. E14 5GN, UK
Tel: +44 (0)20 7248 0468
Fax: +44 (0)20 7248 0467
Web: www.fitchsolutions.com
IS SN: 1750-5445
ISSN:
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Fitch
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This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an
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Q1 2023

Industry Risk/Reward Index ....................................................................................................................................................26

Infrastructure Methodology ....................................................................................................................................................38

Key Forecasts And Latest Updates

INFRASTRUCTURE - CONSTRUCTION INDUSTRY FORECASTS (RUSSIA 2021-2031)

Construction industry value,

Construction industry value,

Construction industry value,

INFRASTRUCTURE RISK REWARD INDEX (RUSSIA 2022-2022)

Russia 47.7 48.5 46.0 52.2 46.5 55.2 37.8

CONSTRUCTION AND INFRASTRUCTURE INDUSTRY DATA (RUSSIA 2021-2031)

Implications Of Russia-Ukraine Conflict Prompt Forecast Revision

f = Fitch Solutions forecast. Source: Goskomstat, Fitch Solutions

Building & Energy Infrastructure Project Pipelines Most At Risk

TRANSPORT INFRASTRUCTURE INDUSTRY DATA (RUSSIA 2021-2031)

Transport infrastructure industry value real

Roads and bridges infrastructure industry value

Railways infrastructure industry value real growth,

Airports infrastructure industry value real growth,

Ports, harbours and waterways infrastructure

Downside Implications Following Invasion Of Ukraine

Slow But Sustained Growth For Rail Infrastructure

Slow But Sustained Growth For Rail Infrastructure In Russia

Source: Fitch Solutions

Increasing Demand For Urban Transport Services

f = Fitch Solutions forecast. Source: UN, Fitch Solutions

Asian Coal Demand To Drive Russian Rail Freight

Railway Infrastructure Dominates

e/f = estimate/forecast. Source: Fitch Solutions

Road Opportunities In Russia Despite Project And Industry Risks

Russian Port Infrastructure Investment Supported By Asian Coal Demand

Arctic Key To Growth In Port Activity

RUSSIA - MAJOR TRANSPORT INFRASTRUCTURE PROJECTS

Moscow Rail Metro 7.6 17,072 na Mosinzhproekt [Construction] {Russia}, Under na

Project Sector Sub- Project Value Size Companies Status Construction

Kazan Engineering Group [Design/Architect]

Energy & Utilities Infrastructure

ENERGY AND UTILITIES INFRASTRUCTURE DATA (RUSSIA 2022-2031)

Energy and utilities infrastructure industry value real

Power plants and transmission grids infrastructure

Oil and gas pipelines infrastructure industry value real

Upside For Oil & Gas Pipelines From Arctic Expansion

Oil And Gas Accounting For Bulk Of Industry Value

e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions

Limited But Improving Prospects For Renewable Energy Deployment

ahead in the medium term.

Opportunities for Green Hydrogen Adoption

RUSSIA - MAJOR ENERGY & UTILITIES INFRASTRUCTURE PROJECTS

Residential/Non Residential Building

RESIDENTIAL AND NON-RESIDENTIAL BUILDING INDUSTRY DATA (RUSSIA 2021-2031)

Residential and non-residential

Buildings Sector Growth In Line With Wider Construction Sector

e/f = estimate/forecast. Source: Goskomstat, Fitch Solutions

Buildings Sector Accounting For Sizable Proportion Of Overall Construction

e/f = estimate/forecast. Source: Goskomstat, Fitch Solutions

Industry Risk/Reward Index

Global And Regional Ranks

• Global rank (out of 104): 63rd

Key Features And Latest Updates

Risk/Reward Matrix Breakdown

Central And Eastern Europe Infrastructure Risk/Reward Index:

Varied Scores Across Region

Main Regional Features And Latest Updates

Numerous Low-Risk Markets In Region