14 May 2012
“In my youth I was planning to become a chess arbiter”
Interview with co-owner of N-Trans Group Andrey Filatov
Last week saw the start of the world chess championship match hosted by Moscow for the first time in 27 years. The initiator of the match in the Russian capital is Andrey Filatov, co-owner of major private transport holding company N-Trans and number 74 in Forbes’ Russian rankings. In the interview below, ANDREY FILATOV tells RBC Daily special correspondent YEVGENIA GAVRILIUK about the role of chess in his life, the development of Russia’s transport infrastructure and his plans for the future.
CHESS PLAYERS AT THE TRETYAKOV GALLERY
Mr Filatov, how was the idea to hold a world chess title match in Moscow conceived?
It was a confluence of circumstances. My university classmate Boris Gelfand won the candidates’ tournament in Kazan. When I asked him where the championship match would take place and whether Moscow was among the bidders, he said, “No.” I said, “You must be kidding. We have the FIFA World Cup, the Sochi Olympics, why not the World Chess Championship?” That was how the idea was born.
Why did you insist that the match be held at the Tretyakov Gallery?
It may be a new tool for the economic development of both museums and chess. We are not yet fully aware of the magnitude of modern players, their popularity and the number of people watching, for example, when Anand plays. Through online broadcasts from the Tretyakov Gallery, users will not only analyse the games, but learn about our paintings, our artists and our art.
The world will get to know artists who have been underrated from cultural, ideological and economic standpoints. That is why a Cezanne costs $250 million and a Konchalovsky only $500,000. This is not right.
How would you assess the popularity of chess in Russia? Would it be fair to say that interest in chess in Russia has diminished?
Interest in chess has not diminished. But investment in chess definitely has. That it is growing year in and year out is also a fact.
What should be done to that end? What would you suggest?
We are doing it. We are hosting the World Championship. Chess fans will see what a great thing it is. The state will see how important and promising it is. Perhaps something will change in state support for chess.
I think the synergy between chess and art holds great promise. Nobody sees chess as a propaganda tool, and yet it is a very convenient instrument for that.
Interest in chess begins in childhood. What can you say about children’s chess in Russia?
It is being revived. Children’s sports are reviving and so is children’s chess.
Do you play chess yourself, and do you teach your children to play?
My daughter plays with tutors.
And you? Do you find time for it?
Is chess a sport or an art to you?
In my youth it was my life, so it was hard for me to answer that question. But I think it is a sport.
WE STARTED WITH COFFEE-GRINDERS
How did you move from chess into business?
In my youth I was planning to become a chess arbiter. I entered the Minsk Institute of Physical Culture. But then perestroika happened and my scholarship shrank to $3 overnight. There was an international tournament in Katowice, Poland. I went there with my chess set, analyses, and books, only to discover that my older and more experienced mates were bringing coffee grinders, cameras and fans… It turned out to be good business: buy for roubles and sell in Poland for dollars. The result was a good addition to the stipend. You might say that is how it all started.
How did you get the idea of going into transport?
In the early 1990s everybody was trying to do something to make money. My future partners and I could only go into services because we had no capital. It could be transport or a recruitment office or something else. But it so happened that we were asked to organise transportation.
I found it very interesting. When I was selling my coffee-grinders in Minsk I was thinking about how trade is organised. I was carrying something in my backpack while other people were bringing containers this was incredible. Later we learned how enterprises do it. They said: “We have a disaster, the foreign trade agencies have collapsed, there is no marketing, no logistics, no transport. We don’t know how to organise it.” We were learning along with the industry. When we were establishing services for them, crazy things would happen. A big ship would come to a port to collect metal cargo, but it could not leave because there were no fastening materials. We were never bored.
What did you start with?
We began by forwarding small batches, then went on to organise services for metallurgical plants and their customers.
Can you tell me how the N-Trans Holding was created?
My future partners Nikita Mishin and Konstantin Nikolaev and I were moonlighting as managers at a freight forwarding company while we were students, and we decided to set up our own. It was a transport forwarding company. We worked for many manufacturers. In due course we decided to propose to a major client setting up a joint venture on an entirely different scale and offer comprehensive logistical solutions to consignors. We put this idea to Alexei Mordashov. In 1996 we registered Severstaltrans, we had development capital and gradually built up a clientele. Exports picked up after the 1998 default. This was a time when demand for logistics was high and there were not many players. The reform of the Ministry of Railways got under way and the rolling stock component was isolated from the tariff so that it became profitable to buy railway vehicles. We invested the profits: we went into transport machine building, the production of locomotives, purchasing carriages, ports. We modernised, expanded, invested, left assets where there were no growth prospects and bought new ones. Within six years Severstaltrans transformed from a forwarding company into a group with a strong port and railway operation.
In 2007 we bought out Alexei Mordashov’s share to create N-Trans. In 2008 we held an IPO of the group’s railway assets, Globaltrans company, and in 2011 our port operator, Global Ports. It’s simple really.
INFRASTRUCTURE IS EVERYTHING
What are your plans for the development of your holding? How do you see the future of your company?
Both Globaltrans and Global Ports are public companies that have their own management and boards of directors that make decisions on how to develop.
Does N-Trans plan any acquisitions in the near future?
Globaltrans is growing quite rapidly. The purchase of 10,000 wagons in three months and the purchase of Metalloinvesttrans under a three-year contract indicate considerable ambitions. So I hope that the momentum will not be lost. As for Global Ports, it is in the process of a modernisation involving a lot of construction and each terminal has a long-term investment program.
Is infrastructure development in Russia a promising business? Does private infrastructure have a future in Russia?
About a third of all proven mineral resources are in the Russian Federation, that is obvious. As global demand grows, these deposits can only be accessed through the development of infrastructure. The country does not have enough gold and currency reserves to develop infrastructure. So, conditions will be created for the arrival of investors. The infrastructure has to be built in order to gain access to the subsoil resources. To build infrastructure, infrastructure companies are needed.
For example, Total came to Yamal, a major project to develop a gas field in harsh conditions. Development of infrastructure in Yamal to allow gas to be transported without gas tanks and special vessels costs more than $30 billion. Japan is currently short of coking coal. To reach the deposits in Tuva, Japanese or Australian companies (who would like to be there) need infrastructure, they need a railway.
The whole world is coming after our subsoil resources. They cannot be had without infrastructure. Without it, you cannot take them out and process them. So, infrastructure companies are needed. Of course, there will be private railway concessions, road and port concessions. The capacity of the infrastructure market is more than $1 trillion, according to former Finance Minister Alexei Kudrin.
Infrastructure companies are above all access to capital. These companies must be honest, public, transparent and trustworthy. That’s it.
Is this a global trend?
Not quite. Gazprom and metallurgical companies are present in our infrastructure market because they have to spend part of their profits to develop infrastructure. Instead of extracting, exploring and drilling, they have to build gas terminals. And yet there are companies that specialise in the development of such terminals. We will also come to that some day. Neither oil nor gas companies can meet that challenge single-handedly. We have been there before. The first concession was set up for the Tsarskoye Selo railway and there was American, European and private Russian capital. It’s the same here. We will get there.
The first concessions, including international capital, have already appeared. Major world companies are showing great interest in Russian infrastructure projects. The European Bank for Reconstruction and Development already has a stake in Globaltrans. It was the time of the crisis, and we made an SPO and a lot of investors from across the world put in money so that we would buy rolling stock with that money. It’s a direct link.
What prompted your decision to take part in the North-West Concession Company (that is building the first stretch of the high-speed Moscow-St. Petersburg motorway)?
NWCC was the first instance of international partnership in road concessions. My personal ambition is to show that this market exists and is developing, that we have passed some unique legislation on concessions and that we are gaining experience in this field. Even the road infrastructure projects that have been announced will cost an estimated $100 billion. Moscow-St. Petersburg, Central Ring Road, M1, M3, M4, M7, Europe-Western China a huge number of projects with different forms of participation (bonds, infrastructure funds, direct investments through PPP). Therefore, the first small $2 billion project in this segment is an important first step.
What is your experience of this work? What is to be learned from this project?
The first conclusion is, of course, that the state is not ready for such projects.
How has that manifested?
The concessionary comes to work and invest. Why should it occur to him to think about whether there is a forest preserve or not, whether or not there are supply lines and stuff? We have an agreement with the state: the state must prepare the site so that construction can begin. In the first project, it turned out that the site had not been prepared. That, of course, gives rise to many questions. So the state has its work cut out if it wants to solve issues through the institution of concessions. And we cannot solve the problem of water treatment, waste incinerators, parking lots or toll roads without that tool. We do not have that much capital.
Is there still an interest in such projects?
Yes, of course. I am personally interested in any infrastructure project.
Are you planning to take part in some specific tenders?
We take part in all tenders. So far, as for the future, time will tell.
Last autumn Gennady Timchenko bought 13% of Transoil shares from your partners, Konstantin Nikolaev and Nikita Mishin. Why are you staying with the company when your partners have pulled out?
We all have personal investments. I prefer to invest in infrastructure transport projects.
So you believe transportation services have a future?
I think the railway sector is one of the best sectors in the infrastructure market in Russia and the world. Russia is a great railway infrastructure power. Transoil is a railway company that is fairly important in our economic space. It is an interesting sector.
How do you assess the progress in railway transport reform?
All that has happened so far is the structural reform that opened up the wagon market. The locomotive, service and railway track markets lie ahead. Of course, there are many problems because investments fall short of requirements. The liberalisation of the rolling stock market in 2001 was a forced measure because it was necessary to raise capital for building new railway vehicles. Otherwise the industry would have ground to a halt.
Before the sale of Freight One there were 500,000 private wagons in the network. The average price was $60,000. So, $30 billion of private money has been invested in the sector. Show me at least one other sector that could modernise so quickly and attract $30 billion.
So, we should move forward. Look, you can judge by the speed of cargo delivery, which is three times less than required. Can you imagine the amount of goods, raw materials and frozen capital that is in the process of being transported today? So much money goes down the drain because of inefficiency.
Inefficiency in what?
What is the reason for such slow cargo delivery? First of all, the underdevelopment of railway tracks and the locomotive fleet. Why are the railway tracks and the locomotive fleet underdeveloped? Because they are starved for investments. Because there are no laws and no conditions for launching the institution of concessions, for example, in railways. Capital, including world capital, has not come to build new railway lines towards new fields. Conditions are lacking for capital to come to the infrastructure market. It would have liked to come. Globaltrans and Global Ports show that capital would be glad to come to our market.
Can you say that you have found a niche for your activities, or are you planning to do something other than infrastructure?
No, I do not yet see myself in any other niche. In principle, I have decided to concentrate on infrastructure and to be in that sector.
Do you have any ideas or projects for art, apart from chess and the Tretyakov Gallery?
I do, but they will be announced later.
How much time does business take? Do you have time left for your family? Can a successful businessman be a good family man?
You should pose that question to my wife.
original text in russian: http://www.rbcdaily.ru/2012/05/14/industry/562949983821584