Pulkovo Airport Expansion Project

Pulkovo Airport Expansion Project

By James Lewis, Vanida Wongdechsareekul, Ben Freeman, Ifat Wong, and Elisabeth Cai under the supervision of Professor Andrew Karolyi – 21 pages. Original version dated: 03/14/2011; current version: 04/08/2015.


Case Summary

The time in the case is April 15, 2010 when IFC’s board of directors is making its final decision to lend to the Pulkovo Airport Expansion Project in St. Petersburg, Russia. The case is written from the perspective of IFC and the student should consider all the pros and cons (risks) of investing/not investing in the project. Originally built in 1932, Pulkovo Airport is the only civil airport in St. Petersburg, Russia’s second largest and most visited city. Citing a need to modernize facilities, in 2008 the St. Petersburg government opened a EUR1.2 billion 30-year concession to expand, develop, operate and maintain the airport. By April 2010, a consortium of equity investors and airport operator were in place to begin the project. Deal financing was fairly clear and a commercial syndicate was in place to take some of the lending exposure.

Some of IFC’s major concerns were:

  • Project finance structure: this would be Russia’s first true PPP deal involving foreign private capital with no government guarantee. What were the risks of investing in this arrangement, and did Russia’s PPP legislative framework provide sufficient comfort for investor rights?
  • What were the reputational risks given the environmental and social context? What did the consequences of the Moscow-St. Petersburg Motorway project have for Pulkovo?
  • Would there be a demonstrative effect for other potential PPP deals in Russia given the country’s huge infrastructure needs? If IFC passed on this deal, would it create challenges for the country to meet investment requirements and create jobs, a key IFC goal?
  • Would the airport meet operational forecasts and provide sufficient returns to debt and equity holders? If not, what would be the consequences for other potential future deals?
  • What are the general political risks investing in Russia?

Discussion Objective

This case provides students the opportunity to learn about characteristics and risks of project finance deals, to learn about the role of the IFC, to learn about investment risks in emerging markets and to learn about investment making decisions.

Subjects Covered

  • Emerging Markets Corporate Strategy
  • Emerging Markets Legal Risks
  • International Finance
  • Project Financing
  • Investment Management
  • Investment Risk Assessment

Geography Covered


Supplementary Materials Available

Teaching Note (Upon request from the case supervisor)

Case Link