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Russia: Attracting Private Sector Investment in Transport Infrastructure

April 17, 2012


The World Bank is advising the city on the section of the Western High-Speed Diameter that is a public private partnership.

This advisory service, provided to the city administration of St. Petersburg in 2007–10, helped to attract over €1.2 billion in private sector investment, and the project was awarded the title of “Global Public-Private Partnership Transaction of the Year” by Infrastructure Investor in 2011. The investment will allow the airport to accommodate an increase in passenger traffic from 6 million in 2010 to 20 million by 2025. The beneficiaries will be not only the direct users of the airport but also St. Petersburg’s regional economy.


The project was part of an ambitious investment program of the city of St. Petersburg to improve roads, seaports, and airport infrastructure in order to foster competitiveness, improve economic growth, and increase job creation. St. Petersburg—and Russia in general—until recently had very limited experience with public-private partnerships (PPPs), which are generally more complex than traditional infrastructure projects, as they require expertise in such areas as finance and law and a deep understanding of the private sector’s needs. The preparation of the project also coincided with the onset of the international financial crisis, which had a largely negative impact on private sector capacity to finance PPP projects.

" We realized we could not do without consultants, who would be more informed and have appropriate and useful expertise. Together with the World Bank experts and one of the leading international law firms, we adopted our own law, and now St. Petersburg’s law on public private partnership is in full compliance with international best practices. "

Yuri Molchanov

St. Petersburg’s Deputy Governor


A public-private partnership is investing up to 1.2 billion Euro to improve and expand Pulkovo International Airport.


The World Bank provided technical assistance to St. Petersburg from the feasibility stage until financing was secured. After the initial analysis concluded that the PPP option was viable, the Bank helped the city hire and manage its transaction advisers (financial, legal, and technical), providing financial and strategic advice throughout the entire process. Although it was outside the scope of this specific task, the Bank team performed a review and analysis of national legislation relevant to PPP transactions, and offered recommendations on the development of a new PPP law. The Bank team also closely advised the city on policy decisions having an impact on the transaction and on managing its own transaction advisers. The approach was to provide real-time advice on any issue arising during the feasibility and transaction phases (2007–10), such as reviewing the outputs (including bidding documents and recommendations) of the transaction advisers, and contributing to discussions about the risk allocation between the public sector and the concessionaire—and its implications for the city.


By 2025, more than double the airplanes and triple the number of passengers will come through the airport.


The project has secured more than €1.2 billion in private investment and the airport is currently under construction. The concessionaire—the Northern Capital Gateway—will refurbish and modernize the facility and oversee its operations until 2040. Airport capacity is expected to increase to 20 million passengers per year by 2025, compared to 6 million in 2010, and will be sufficient to meet future demand. Indirect benefits to the economy will start accruing once the construction is completed. The project was awarded the title of “Global PPP Transaction of the Year” in 2011 by Infrastructure Investormagazine. St. Petersburg has since adopted it own PPP law, which is more in accordance with international best practices. As this has been one of the first international PPP projects in Russia, it has strengthened the capacity of the city administration to manage transaction advisers and prepare complex PPP projects, and in the process, has contributed to improved investment prospects for St Petersburg by demonstrating the capacity of the City to prepare viable PPP projects.


Building a ring road to ease downtown congestion is part of St. Petersburg's ambitious plan for better infrastructure, and includes the airport. The first leg of the Western High-Speed Diameter ring road—a toll road—is already open.

Bank Contribution

The Bank contribution consisted of technical assistance to the city administration and project team on the Pulkovo Airport Expansion Project, which was provided on a fee-for-service basis. This project did not involve any funds from the Bank.


The International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) have jointly raised €370 million through direct financing and syndication. IFC committed a €70-million loan of its own funds to the project, while the EBRD pledged €100 million. The syndication resulted in a contribution of €200 million from a group of eight commercial banks. The IFC-EBRD funding is part of a long-term debt package of roughly €716 million put together by five international financial institutions and Russia’s Bank for Development and Foreign Economic Affairs (Vnesheconombank), to finance the project.

Moving Forward

The city administration strengthened its institutional capacity to prepare PPP projects and manage advisers. Since the completion of the venture, the city has been developing new projects and recruiting advisers, without need of additional Bank support. Among the new PPP projects under development are a solid waste processing plant in the village of Yanino and the rehabilitation of St. Petersburg’s Northern Water Pumping Station, involving the introduction of two-step technology for water purification.


“We realized we could not do without consultants, who would be more informed and have appropriate and useful expertise,” said Yuri Molchanov, St. Petersburg’s Deputy Governor. He added: “Together with the World Bank experts and one of the leading international law firms, we adopted our own law, and now St. Petersburg’s law on public private partnership is in full compliance with international best practices.”

€1.2 billion
in private investment has been secured by the project.
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