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“According to Vedomosti, Mr. Yakunin disregarded capital costs in his calculations - the preparation of the infrastructure, the construction of depots, and even the purchasing of the trains themselves.”<o:p></o:p> “As a matter of fact, the total spending on acquisition, technical preparations, railway repairs and construction of depots made up 45.22 billion rubles. Three pairs of Moscow-St. Petersburg trains return the monthly profit of not more than 231 million rubles. Therefore, the project of high-speed trains in <st1:country-region w:st="on"><st1:place w:st="on">Russia</st1:place></st1:country-region> is not going to pay back during the upcoming 16 years.”<o:p></o:p> The aforementioned statements are confusing.  If the first statement is accurate, the trains are not profitable.  They may generate an operating profit, but the calculation ignores the capital costs, which is not acceptable accounting.  Profitability requires the inclusion of all costs.  Excluding the capital costs would produce an adverse opinion from the auditors and financial analysts. If the second statement is accurate, it appears to ignore the financial costs associated with the technical preparations, railway repairs and construction of depots, or at least the financial information is not provided.  Depending on the terms of the financing, i.e. interest rates, terms, investment banking fees, etc., the long term cost of the project could be double the stated cost.  For example, the backers of the California High Speed Rail Project estimate the project will cost between $40 and $45 billion.  However, when the financial costs are factored into the cost structure, the cost of the project is likely to be in the neighborhood of $73.2 billion to $82.3 billion.  Based on the projected ridership and revenues, the project will never pay for itself or be profitable.
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