The EBRD is financing the complete refurbishment of St. Petersburg's aging Pulkovo airport to match international airport standards.
The first impression many travelers get of a city is determined by the look of the airport at which they land. The introduction to St. Petersburg given to arriving passengers by the city’s Pulkovo airport nowadays is hardly the one that Russia’s architectural jewel on the Baltic deserves. The design of Pulkovo’s Terminal-1, completed in 1973, is a Soviet modernist icon and the building itself will, for that reason, be preserved, but its interior has long been crying out for a clean-up.
Shabby in far too many places and known to long-suffering passengers for its stale odours, the terminal is set to be completely refurbished to bring it up to international standards as part of a major overhaul. The EBRD is participating in the financing for this, along with four other International Financial Institutions and Russia’s state-owned development bank.
The inhabitants of St. Petersburg are known in Russia for being inordinately proud of their 300-year-old city and that affection for every nook, cranny and oddity extends to the five strangely-shaped funnels sitting on the roof of Pulkovo’s Terminal-1. It was built between 1967 and 1973 by Alexander Zhukov, a Soviet architect wounded in World War Two, and who during its construction twice a day modestly covered the three kilometers separating Pulkovo from his home on foot.
His creation is because of these funnels locally known as the “saucepans,” the “five upturned glasses” or simply as the “steam-ship.” Saving this relic of Soviet architecture of the 1970s was a condition of the 30-year-concession granted by the city of St. Petersburg to the consortium which in 2009 won the right to modernise the airport.
The project aims to double the number of passengers Pulkovo can handle by the time it is completed. In 2009, nearly seven million passengers used this airport, already Russia’s fourth largest in terms of traffic. However, existing facilities have reached their capacity limit and do not allow for further traffic growth. This is acting as a major constraint on the development of the most visited city in Russia as the local economy needs to attract even more tourists while St. Petersburg itself harbours ambitions to become a major transport hub.
First of its kind
If properly run, airports generate predictable revenue streams which give comfort to lenders but the economic crisis has made it far more difficult to finance large-ticket infrastructure projects such as Pulkovo. This is where the EBRD and the other IFIs involved come into the picture. The structure chosen for this transaction is a Public-Private-Partnership (PPP), well suited for such a long-term project. What makes the Pulkovo deal unique is that it is the first airport sector PPP in Russia to be structured in accordance with international standards.
It is also the first involving an experienced international partner, the Frankfurt airport operator Fraport. How this project proceeds could therefore have far-reaching effects on the way many other major Soviet-era infrastructure projects in Russia awaiting renewal will be financed.
The first part of the project will see the completion of a new terminal at Pulkovo for both international and domestic passengers by 2013. The EBRD is providing a 15-year, €100 million “A” loan and is in advanced negotiations together with the International Finance Corporation (IFC), the private sector arm of the World Bank, on a joint syndication, using an A/B loan structure, to raise some €190 million from a group of international banks. Additionally, the IFC is advancing a €70 million loan on its own account.
The Eurasian Development Bank (EDB) is providing USD90 million while two other IFIs, the Nordic Investment Bank (NIB) and the Black Sea trade Trade Development Bank (BSTDB), are respectively contributing €50 and €15 million. In addition, Russia’s state-owned Vnesheconombank (VEB) is lending 10 billion roubles, thus bringing the total being advanced by these six banks to the equivalent of €716 million.