The European Bank for Reconstruction and Development has lent $130 million to JSC “Freight One”, a wholly-owned subsidiary of Russian Railways (RZD), to fund the renovation of its rail fleet in order to boost this major freight operator’s productivity.
The 10-year loan provides key backing for the continuing reform of Russia’s railway system at a time when financial markets are in turmoil and underlines the EBRD’s long-term commitment to this strategic sector of the Russian economy.
It is the sixth Russian rail-related transaction signed by the EBRD in the last two years and brings the Bank’s total investments in the sector to over $700 million since 2004.
The EBRD’s mission, particularly in such market conditions, is to support investments in key infrastructure renewal such as the one on which JSC “Freight One”is embarking as it starts to renovate its fleet of 200,000 rail cars, one of the largest in Russia, said the EBRD’s First Vice President, Varel Freeman.
This transaction is extremely important for us, especially given the current world economic slowdown, as it demonstrates trust in Russia’s rail sector by international financial institutions and a high regard for the way our company runs its business, said Alexey Taycher, Freight One’s First Deputy CEO and Chief Financial Officer.
Eighty-five percent of Russian freight traffic – excluding pipeline traffic – was transported by rail in 2007. Rail freight’s predominance is explained by the huge dimensions of the country and the current state of the Russian road system.
JSC Freight One was set up as an independent rail freight company in 2007, inheriting one third of RZD’s rail car fleet, but operating separately from RZD as part of a reform aimed at reducing state participation in railway operations.