Pulkovo airport

By EBRD  Press Office

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Transaction seen as setting precedent for future Russian infrastructure projects

The EBRD today committed to lend €100 million to finance the building of a new terminal at St. Petersburg’s Pulkovo airport as part of a €716 million long-term debt package being put together by five International Financial Institutions and Russia’s Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) to fund this landmark Public-Private-Partnership project.

The package will include some €190 million of commercial bank debt which the EBRD and IFC, a member of the World Bank group, are in the process of raising under an A/B loan structure through a forthcoming joint syndication to a group of international banks.

The EBRD’s €100 million A loan carries a 15-year maturity.

Key to IFI interest in this concession finance project is its demonstration effect as the first PPP for the airport sector in Russia structured in accordance with international standards. It is also the first involving an experienced international partner, Germany’s Fraport AG. The group operates Frankfurt airport and can thus contribute unique know-how.

The success of this transaction, especially in current market conditions, shows that well-structured PPPs can be a viable form of infrastructure financing. This is of critical importance in Russia where the authorities admit that a vast amount of infrastructure inherited from the Soviet period is in need of urgent modernisation.

This project will bring to well over €800 million the amount invested by the EBRD so far in St. Petersburg, over 50 percent of which has been earmarked for essential infrastructure projects such as this airport renewal project which we hope will serve as a model that can be adopted in other parts of Russia, EBRD First Vice President Varel Freeman said at the signing.

 The borrower is Northern Capital Gateway (NCG), a consortium which includes VTB Group, Fraport AG and Horizon Air Investment SA, part of Greece’s Copelouzos Group, and which last year won a 30-year concession from the city of St. Petersburg to rebuild, finance and operate Pulkovo airport. The consortium’s financial advisor is VTB Capital.

Pulkovo’s 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 St. Petersburg, the most visited city in Russia, as the local economy needs to attract even more tourists.

Once completed, the project aims to double traffic numbers at Pulkovo. The airport, already Russia’s fourth largest in terms of traffic, handled nearly seven million passengers in 2009.

Under the first phase of the project, a new terminal serving both domestic and international passengers is due to be finished in 2013.

IFC is for its own account directly lending €70 million for the project. The other IFI lenders involved are the Eurasian Development Bank (EDB) (USD90 million), the Nordic Investment Bank (NIB) (€50 million) and the Black Sea Trade and Development Bank (BSTDB) (€15 million).

Separately, Russia’s state-owned Vnesheconombank (VEB) agreed to lend 10 billion roubles (approx. €250 million).

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