Investment structure

Capital expenditures provided for in FPC’s investment programme totalled RUB 17.8 billion in 2015.

In the reporting period, the Company purchased 185 new passenger carriages for RUB 12.6 billion, including:

• 80 TALGO carriages;
• 70 double‐decker carriages, including 16 carriages for interregional passenger services with open‐plan seating;
• 25 third‐class carriages;
• 10 RIC carriages.

RUB 3.9 billion was spent on the rolling stock upgrades.

The remaining capex totalling RUB 1.3 billion, or 7.6%, was used to support depot upgrades, IT projects, and other initiatives.

The new rolling stock was purchased to upgrade the fleet and replace retiring carriages.

In 2015, the Company purchased 80 TALGO carriages (worth RUB 4.4 billion) to run passenger services between Moscow and Nizhny Novgorod.

Additionally, FPC purchased 70 double‐decker carriages (worth RUB 5.4 billion), including 16 double‐deckers for interregional services (worth RUB 1.2 billion). The new rolling stock is used on busy profitable routes, namely Moscow – Samara, Moscow – Voronezh and Moscow – Saint Petersburg. The double‐deckers improved the Company’s competitiveness by reducing transportation costs.

With government subsidies shrinking in 2015, the Company acquired only 25 third‐class carriages (worth a total of RUB 0.8 billion) and 16 double‐deckers for interregional passenger services (worth a total of RUB 1.2 billion).

FPC is keen to maintain its fleet of third‐class carriages for the following reasons:

• Passenger services in third‐class carriages are in demand in the Russian regions with low household incomes due to low ticket prices.
• Third‐class carriages are used to transport children in groups during school holidays (over 0.5 million children annually).
• FPC is obliged to provide third‐class carriages at the request of the Russian Ministry of Defence to transport servicemen and evacuate civilians.
• Third‐class carriages in branded trains are operated at a profit since revenue shortfalls are compensated in the regulated segment. This allows to offset the operating expenses of non‐branded train services on socially significant routes while reducing the total subsidy requirements.
• Third‐class carriages are used on routes where no alternative transport options are viable and train services need to be maintained.

In 2015, Tver Carriage Works completed a contract awarded by RZD in 2011 for 200 RIC carriages. The last 10 carriages worth RUB 2 billion were delivered to FPC in February 2015. The RIC carriages are intended to be used in international passenger services.

As part of its 2015 Investment Programme, the Company financed a RUB 3.9 billion Passenger Rolling Stock Upgrade project. Most funds (RUB 3.1 billion, or 81%) were used to perform carriage overhauls with service life extension.

In addition, the Investment Programme provided for depot upgrade projects and IT projects.

RUB 0.8 billion was spent on depot upgrades.

Investments in depots were used primarily to:

• Construct new facilities (RUB 0.1 billion).
• Upgrade existing production facilities (RUB 0.4 billion).
• Install security and fire alarm systems at production facilities (RUB 0.1 billion).
• Purchase equipment to ensure uninterrupted depot operations (RUB 0.1 billion).
• Upgrade hazardous production facilities (RUB 0.1 billion).

RUB 0.4 billion was spent on IT projects in 2015. A priority IT project for FPC was the development of ticket sales, with investments totalling RUB 0.2 billion; RUB 0.1 billion was spent on the route network optimisation.

Investments in other projects totalled RUB 0.1 billion.

Sources of financing for the 2015 Investment Programme were:

• Equity: RUB 14.7 billion
• Borrowings: RUB 3.1 billion

The key reason for year‐on‐year change in the size of capital investments was a smaller number of passenger carriages purchased in 2015 (185 vs. 274 in 2014), with a difference of 89 passenger carriages worth (RUB 8.5 billion).

By contrast, a 4.3‐fold increase over 2014 in rolling stock upgrade costs was associated with the need to maintain the required performance levels of the Company’s railcar fleet.