HOW TO ATTRACT INVESTORS TO MODERNIZE UTILITY INFRASTRUCTURE IN SMALL LOCALITIES?

Potential investors should be able to enter into concession agreements with several municipalities simultaneously

Deputy Head of FAS Department for Regulating the Housing-and-Utilities Sector, Anastasia Adonina highlighted this idea at the Round Table – “Concessions for small towns and localities” at the State Duma of the Federal Assembly of the Russian Federation.

Small localities often suffer from heavy wear of water- and hearing supply facilities used to deliver utility resources, while local authorities cannot modernize the housing-and-utility facilities or build new ones on their own. Including capital costs in the tariffs will radically increase them, which is unacceptable.

The law on concession agreements specifies the means to distribute the costs between owners of public property and private investors. For example, a concedent can bear some concession costs. Also, there can be public or municipal guarantees in accord with the budget legislation.

Another mechanism of investor protection is to compensate lost income of concessionaires or extending validity of a concession agreement. These and other measures are already formalized in the law and are aimed at enabling stable conditions for concessionaire’s operations.

To involve unattractive housing-and-utility facilities into economic turnover, particularly, in small towns, and attract investments to modernize them, the current law already provides for combined tenders covering several municipalities. It allows combining both attractive and unattractive facilities, from the investor’s point of view, into concession objects.

“Thus, several mechanisms enabling owners of public or municipal utility facilities to efficiently administer their property, are already available”, explainedAnastasia Adonina. “Several problems, however, remain and to solve them amendments to the law are necessary”.

“As an additional way to involve unattractive public or municipal facilities, FAS proposes to make amendments to the Law on concession agreements. It is referred to possibility for a potential investor to apply for a concession agreement covering housing-and-utility facilities in several municipalities simultaneously, similarly to the existing mechanism of combined tenders”, said Deputy Head of FAS Department for Regulating the Housing-and-Utilities Sector.

The Round Table is organized by the Committees of the State Duma on energy generation, on housing policy and the housing-and-utility sector, on the federative framework and local self-government.

Reference:

Concession agreement is concluded between a concessionaire (a private investor) and a concedent (a public structure).

Concedent – a holder of property rights for the facility that is subject of a concession agreement.