The development of sustainable urban infrastructure is one of the greatest challenges of the 21st century. Airports being the doors to the largest cities experience constant and the most significant pressure of all the urban infrastructure objects. In Russia the depletion of main airport assets is estimated from 40% to 80%. Thus, the importance of the projects on improving airports infrastructure in Russia is hard to be over-estimated. Pulkovo airport is a third Russian airport by passenger traffic, located in Saint-Petersburg, and has been chosen to be renovated through PPP mechanism. This project was structured under regional PPP Law of Saint-Petersburg.
Pulkovo project execution will facilitate positive economic and social effect on the city. Approach of St. Petersburg government to preparation of feasibility study and tender organization based on best international practice has resulted in attracting of 7 consortiums on a prequalification phase which showed interest of investors to the project. From another side, interest to the deal from international commercial banks was so high, that volume of bank bids exceeds by two times projects needs. Pulkovo project has become a flagship PPP project in Russia which managed to attract long-term bank financing (15 years), creating the grounds for long-term financing of PPP projects in Russia.
To that end, KPMG’s Global Infrastructure Practice is pleased to announce that Pulkovo Airport PPP has been chosen as one of the 100 most innovative and inspiring urban infrastructure projects in the world.
A profile of Pulkovo Airport PPP is now featured in the much-anticipated second edition of the Infrastructure 100: World Cities Edition, which was recently released at the World Cities Summit in Singapore. This edition provides insight into the infrastructure projects that make great cities, with a particular focus on the innovations that make them ‘Cities of the Future’ – places where people want to live and do business.
Robert Vartevanian, Partner, Head of Infrastructure, Construction & Real Estate KPMG in Russia and the CIS, is commenting on the Pulkovo project: “Pulkovo is the first and major commercial project of such a scale (estimated CAPEX 1.2 bn EURO). But this is not the only reason why the market will be watching it closely. St. Petersburg is not only the biggest tourist destination city of Russia, but also the second largest center for business activity in Russia. Considering St. Petersburg’s heritage and position, it’s critical for this city to have a modern hub. Most definitely, Pulkovo project is visible and of significant importance and will be a model for the future Russian PPP projects.”
Due to unique structural elements of Pulkovo project it had reached financial closure during world’s financial crisis. The source of revenue for winning consortium is aviation and non-aviation activities. D/E ratio was 60/40. Due to ability of Pulkovo airport to generate revenue in Rubles, US dollars and euro, debt structure was fitted to it. Debt for the airport was raised in Rubles, USD and Euro which ensure optimization of financing structure of the project.
Pulkovo is the first project of such scale that is implemented under PPP mechanisms and inevitably it will be implemented with some minor drawbacks. The infrastructure of the airport is not developed enough; there is no quick transport to the airport from city-centre which creates a challenge to the investor developing the project. Another challenge the project can face is rapid increase of passenger and cargo traffic while customs services are not adapted to the new traffic.
Development and reconstruction of the airport will attract airline discounters in St. Petersburg which will increase mobility of the city population. Development of freight traffic through the airport Pulkovo will help to optimize transportation costs and reduce time of delivery in some sectors of the economy which will lead to stimulation of the business activity in the city.
Transport and utilities sectors are key problem areas in St. Petersburg infrastructure. The City administration is relying on PPP as a method of delivery of projects in these sectors. Examples include Pulkovo Airport PPP, Western High-Speed Diameter (WHSD), Orlovsky tunnel, Neva Water , Yanino waste plant projects. Pulkovo Airport PPP has created a business case for future PPP projects in St. Petersburg and Russia as a whole.
“In late April 2010 the City of St. Petersburg entered into a PPP agreement with Northern Capital Gateway for the operation and development of Pulkovo airport for a period of 30 years. It is the first contract of such kind for Russian infrastructure and a light spot on the country's development path”, - comments Andrea Pal, Deputy General Manager, Northern Capital Gateway Ltd. – “In 2014 Pulkovo will have a new and modern terminal facility and will be able to improve the customer service. The investments for the first phase of development amount to 1.2 bln EUR and are provided by the shareholders (VTB, Fraport and Horizon) and a consortium of 13 international banks. The team of NCG is very proud to be part of this outstanding project for the city of St. Petersburg and for Russia”.
The projects showcased in the Infrastructure 100 are made up of approximately 20 projects selected by judging panels of industry experts from five regions of the world, including: Asia Pacific, North America, Latin America, Europe, and the Middle East and Africa. Projects were then sorted into 10 project categories, including: Urban Mobility, Global Connectivity, Urban Regeneration, Education, Healthcare, Water, New and Extended Cities, Recycling and Waste Management, Urban Energy Infrastructure, and Communications Infrastructure.
Five regional judging panels assessed hundreds of submissions on the following criteria: feasibility, social impact, technical and/or financial complexity, innovation and impact on society.
Pulkovo Airport PPP project was highlighted as part of the Global Connectivity category, alongside with such projects as Delhi-Mumbai Industrial Corridor (India, the winner in the category), Ethiopia Djibouti Railway (Ethiopia), California High-Speed Rail (USA), Medine Airport (Saudi Arabia), Calgary International Airport (Canada), Embraport Project (Brazil), Bioceanico Aconcagua Corridor (Chile/Argentina), Trans-Sumatra Toll Road (Indonesia), Fehmarnbelt Crossing (Denmark/Germany).
The complete list of the 100 projects can be viewed online at www.kpmg.com/infrastructure100.