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Kyiv administration: Subway line to Troyeschyna to be built on public private partnership conditions

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Sept. 24, 2012, 12:22 p.m. | Ukraine — by Interfax-Ukraine

Kyiv's fourth subway line will be built on the public private partnership conditions, which will allow the city not to borrow, the press service of Kyiv City Administration has reported, referring to Deputy Chairman of Kyiv City Administration Ruslan Kramarenko.
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Kyiv's fourth subway line will be built on the public private partnership conditions, which will allow the city not to borrow, the press service of Kyiv City Administration has reported, referring to Deputy Chairman of Kyiv City Administration Ruslan Kramarenko.

The report says that this will be a first large infrastructure project under a public private partnership scheme carried out in Ukraine.

"The law that regulates these relations was passed two years ago, and over the period no one has been able realize a large-scale project under the public private partnership scheme, as this is a laborious work which requires detailed calculations and a clear and transparent scheme of cooperation with an investor. Kyiv city will be the first [to realize such a project]," reads the report, citing Kramarenko.

He said that Kyiv city is thoroughly working on a subway construction project using investor's funds, and at present an agreement with Russia's Federal Center for Project Financing, which won a tender to select a financial advisor in summer 2012, is being drawn up.

Until the end of this year, the company will submit two financial models for the construction and operation of the new subway line under a public private partnership principle. They will be studied by specialists and will be presented for public discussion, Kramarenko added.

The first model will be a concession scheme – with such approach an investor will return invested funds from income seen from the sale of tickets and the difference in the tariff from the city, as the cost of tickets today is lower than the economically justifiable level, and a private company will exploit the line.

The second financial scheme is a lifetime agreement. The investor will obtain money from the city budget for 15-20 years, and Kyiv Metropoliten municipal enterprise will exploit the line.

"The line will remain under the ownership of the community irrespective of who will exploits it – a private company or the city," he said.

Kramarenko said that the price of tickets on the new line would be the same as for other subway lines.

He said that ahead of the election the issue of building a subway line to Troyeshcyna district had become a very politicized one.

"Today most of the participants in the election process actively criticize the construction project, not going deep into the notion 'public private partnership.' There are claims about possible large debts for the city and enormous interest rates to service them," Kramarenko said.

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