Press-Center

City Hall has announced the nine companies who are participating in the tender for the reconstruction of Pulkovo Airport and have submitted volumes of technical and background documentation to boost their chances of winning the tender, which requires $1 billion in investment and will offer multi-billion returns. None of the bidders is currently regarded as the unanimous favorite, but experts say that the real battle will be unfolding between behind-the-scenes financial corporations.

The tender for the reconstruction of Pulkovo was announced by the St. Petersburg authorities in April, during a presentation in London that attracted more than 100 interested companies, of which just nine have become preliminary bidders. They are the Moscow-based Petroport-Kontsessii Open Stock Company, Nevskoye Nebo Ltd, Nevsky Aeroport Ltd, Novaport Ltd and Farvater Financial and Industrial Company; the St. Petersburg-based Alice Construction Corporation and International Airport St. Petersburg Ltd; and two bidders from abroad — India’s GMR Infrastructure Ltd and Turkey’s TAV Airport Holding Company.

“[Pulkovo Airport] is meaningful and significant for the city and we are delighted to see numerous bids,” said Alexander Vakhmistrov, St. Petersburg deputy governor and head of the tender commission, announcing the list on Thursday.

Oleg Panteleyev, head of the analysis department at Aviaport Agency, told Vremya Novostei newspaper that it was impossible to rank the bidders in the tender. “In my opinion, India and Turkey are unlikely to have good chances if they participate without considerable financial back-up. But a surprising update on partnership issues may be the next part of the tender process.”

Although City Hall declined to name the companies taking part in consortia until the bids have been reviewed, there is speculation that some of the participants have been created specifically to be eligible to bid, and most of the bidders are backed by larger holding investors who have already declared their intention to seize the opportunities that have opened with the decision to develop Pulkovo Airport.

Among the backstage companies, Vedomosti reported Friday, is Russian aluminum oligarch and billionaire Oleg Deripaska’s Basic Element, acting in partnership with Singapore’s Changi Airport and represented by Nevsky Aeroport. Other participants include a grouping of billionaire Viktor Vekselberg’s Renova holding company and the German road construction company Hochtief, while Vneshtorgbank (VTB) is allied with the German airport operator Fraport Group, the newspaper reported

Lider Asset Management, the largest company of its kind in Russia in terms of assets, stands behind Petroport-Kontsessii Open Stock Company, together with Vienna Airport Group, sources at Lider confirmed on Monday.

“The strategic partnership of Lider Asset Management and Vienna International Airport allows both our companies to coordinate efforts and gain a synergic effect from the cooperation of the two companies,” said Mikhail Bykhanov, deputy Chief Investment Officer at Lider.

The local private housing developer Alice Corporation is the only bidder in the tender that is not related to the aviation industry or airports. According to Andrei Bryundikov, Alice’s CEO, the company is interested in a bigger construction project and is now looking for a partner capable of managing the airport as soon as the reconstruction is completed.

According to the concession agreement signed at City Hall, the winning company is to manage Pulkovo for thirty years, making it a mouthwatering bonus for investors, as estimated income during that time could vary from $5 billion to $10 billion. Experts say that even more income is expected as the reconstructed Pulkovo will have a small, modern private aviation terminal, which will provide services for business people who travel in private jets.

“The excitement around Pulkovo is easy to explain,” said Yevgeny Shago, an analyst at Ingosstrakh Investments, who believes the estimates of passenger growth rates are generally exaggerated as Pulkovo Airport will not become a transit hub serving 25 million passengers by 2025, as City Hall hopes. “The rates will at most double. Investors are attracted because airports are at present probably the only kind of promising asset not being distributed,” he said.

Next Monday, the bidding companies will see further shortlisting according to the size of their assets, which should include more than $1 billion, and whether they have sufficient experience in construction and airport management. To avoid censure from Russia’s monopoly bodies, the tender conditions, elaborately implemented by the city’s transport committee, restrict air transport companies from owning more than 15 percent of bidding companies. In addition, airport owners or operators located within 800 kilometers of St. Petersburg, such as Helsinki, Stockholm, Riga, Tallinn, Minsk and Moscow, are also ineligible for taking part in the tender.

When the results are announced next Monday, the companies on the shortlist will have to submit official bids. The winner will be announced in March next year, but Smolny is reluctant to announce the amount of investment needed for Pulkovo.

“We have approved estimates, but they are still approximate and the figures are not to be made public,” said Vakhmistrov, declining to comment on the fact that earlier this year the local media reported a starting investment figure of $1 billion.

The project’s architecture will also be the responsibility of the winning investor, who will have to liaise with the British firm Grimshaw, whose design was chosen at the end of last year.

The renovated airport terminal will comprise three commercial areas, including parking lots, a business center and hotel, as well as the transport terminal which will feature a 22,000-square meter baggage reclaim area and a large departure and arrival center. When the reconstruction is complete, Pulkovo Airport is expected to be able to accommodate around 17.5 million passengers annually.

The airport will continue to operate during the reconstruction process, whose timeframe will be determined by investors. According to Pulkovo Airport’s CEO, Andrei Murov, flight schedules will not be affected. “The terminals at Pulkovo-1 and Pulkovo-2 are capable of handling the passenger flow.”

Together with Moscow’s Domodedovo and Sheremetyevo, Pulkovo is one of the biggest airports in Russia and is the biggest in the northwest, with a net income of around 625 million rubles ($26.8 million) in 2007. During the first half of 2008, passenger numbers totaled 3.3 million.