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. Last Updated: 07/27/2016

Brunswick Venture to Buy, Lease Out Cargo Rail Cars

Investment company Brunswick Capital Ltd. has become the first Western company to invest in the domestic rail cargo sector with an announcement that it has launched a company with a Russian partner to buy and lease rolling stock.

Brunswick Rail Leasing is a joint venture with Transgroup AC, one of the country's largest private railway operators, which owns 3,000 rail cars and rents another 8,000.

The new firm plans to invest $200 million over five years in acquiring its own rolling stock, which is to number 10,000 units by 2008, according to a statement released by the Railways Ministry. If BRL succeeds, it would become the country's top rail leasing firm.

Christopher MacKenzie, board chairman for Moscow-based Brunswick Capital, met Tuesday with Railways Minister Gennady Fadeyev, whom he invited to lease the new company's rolling stock.

Fadeyev welcomed the new company but promised nothing. "Leasing schemes alone won't resolve the need to renew the rolling stock," he said. "Neither this year nor in the foreseeable future."

The ministry has already begun to use leasing schemes to acquire rolling stock. This year the ministry plans to lease about 9,000 cargo wagons, yet this amounts to only a fraction of the hundreds of thousands of aging rail cars the ministry owns and needs to replace.

Fadeyev proposed that Brunswick Capital consider not just buying and leasing rolling stock, but investing in the production of a new generation of rail cars and locomotives.

MacKenzie, who previously worked for a European division of U.S.-based General Electric, may find himself on the same playing field as GE, which said in March it was prepared to build a $75 million locomotive production facility near St. Petersburg. A decision is expected by the end of the year.

The ministry's priority is to channel investment into domestic production. With reform of the railways monopoly underway, Fadeyev said competition among rail-car and machinery producers will be necessary for the success of the Russian Railways Co., the $50 billion private company due to spin off from the ministry this fall.

The Railways Ministry has several production projects in mind, including its plans to assemble electric commuter trains at the Smyshlyayevsky repair plant in the Samara region and to launch new production lines in the Krasnodar region.