Transmasholding, Russia’s largest producer of rolling stock, will become an exclusive supplier of rail cars for Moscow metro during the next 30 years.

Transmasholding was registered as the only participant in the tender for the supply of 768 new cars for Moscow  metro. The amount of the contract is estimated at 133 billion rubles (US$4 billion).

The first supplies of rail cars will be started in 2017.

Transmasholding was not the only bidder for the tender. The plans for participation were announced by some leading local and foreign producers of rolling stock, however all of them decided not to participate in the tender, believing that its conditions were designed within the interests of Transmasholding and will guarantee a victory to the company.

According to other bidders, the amount of the proposed contract was extremely low.

According to an official representative of Bombardier, a Canadian multinational aerospace and transportation company, which was also one of the bidders for the tender, the Moscow metro market  has strategic importance for the company, however it has no plans to participate in the tender on the announced conditions.

The same position is shared by CAF. According to the company, the current conditions of the tender make the project unprofitable, so the company decided to leave it. An official spokerperson of CAF said that participation in the project will be associated with the need to borrow funds at high interest rates for the company. At the same time he has also expressed his hopes of changing of the conditions of the tender in the future, which will create the possibility of participation in it for the company.

An official representative of Siemens Russia declined to comment, regarding with this issue. Earlier, President of Siemens in Russia and Central Asia Dietrich Muller called the conditions of the tender as "very complex".

In the meantime, the conditions of the tender have already been disputed by other potential bidders, among which are Uralvagonzavod, Bombardier and CAF, which have recently sent an official petition to the Russian Federal Anti-Monopoly Service (FAS), however the latter decided to reject their claims.   

According to the companies, Transmasholding has a priority position during the tender, due to its affilation with Maxim Liksutov, head of Moscow department of transport.

The producers have also said they are disappointed with the forthcoming tender, adding that they beared huge costs, associated with it, the majority of which accounted on the development of prototypes of rail cars for the tender.

They have also added administration of Moscow metro convinced them not to participate during the first stage of the tender, which took place at the beginning of the current year, and which involved the supply of 832 rail cars at 143 billion rubles (US$4,5 billion), (which was also won by Transmasholding) through the promising them to provide more favorauble conditions during the second part of the tender, however this was never happened.

In the meantime, Transmasholding has already asked for state support for the execution of the contract. As part of these plans, the company has already filled a petition to Russia’s President Vladimir Putin, asking to subsidize interest rates on the loans, which were allocated from banks under the contract.

According to Andrew Bokarev, a co-owner of Transmasholding, domestic producers of rail cars are unable to receive loans on the same conditions than foreign companies.

According to sources close to the Russian Presidential Administration, Vladimir Putin has already instructed the national government to consider measures of support of Transmasholding.

The situation is aggravated by the reluctance of banks to provide loans for the project under the 8,25% interest rates, which are set by the contract and which are significantly lower the current minimal rates of Russian banks of 14%.

According to some sources close to Transmasholding, the company considered the possibility of the allocation part of the funds for the project from the Russian National Wealth Fund, Russia's sovereign wealth fund, however such a proposal has not been approved by the Russian Ministry of Finance.

According to analysts of the Russian Ministry of Transport, amid the current economic unfavourable economic situation in Russia, caused by sanctions, imposed on the country, the provision of subsidies will be unlikely for the company.

In this regard, the only way for Transmasholding to get the needed funds for the project is to allocate short-term loans, however, taking into account that the company has already allocated loans for the implementation of the first contract its debts will reach 270 billion rubles (US$7 billion), the allocation of additional loans may pose a threat of the company’s default.

Overall, Moscow metro plans to purchase 1600 rail cars by 2020.