Singaporeans to Develop Airports in Southern Russia
Nov. 3 – Changi Airports International (CAI), Basic Element Group, and LLC Sberbank Investments (a subsidiary of state lender Sberbank), have signed a memorandum of understanding to form a joint venture to invest in and develop airports in Russia.
CAI, the company that operates Singapore’s main airport, will hold 30 percent, Basic Element will hold a controlling stake of 50 percent plus one share, and LLC Sberbank Investments will hold 20 percent minus one share in the joint venture.
Basic Element, controlled by Russian tycoon Oleg Deripaska, currently owns a cluster of airports in Russia’s southern Krasnodar region, including the cities of Sochi, Anapa, Gelendzhik and Krasnodar, which is also the home hub of Basic Element-controlled Kuban Airlines. The total passenger traffic of the cluster is expected to exceed 5 million passengers annually in 2011.
As Basic Element says in its press release, the main goal of the joint enterprise is “to develop these airports, to improve levels of service, to meet international standards, increase capitalization of the assets, and also to expand the portfolio of airport assets.”
Krasnodar region, known as the agro-industrial center of Russia, will be hosting the Winter Olympics 2014, F1 starting from 2015, and the FIFA World Cup in 2018.
The creation of the joint venture is targeted to be completed in the second quarter of 2012. It is subject to due diligence and final negotiations between the parties and approval by the regulatory authorities.
“The signing of this MOU is an important strategic step in the development of Basic Element’s airport business. We welcome this partnership with Sberbank and Changi Airports International,” Oleg Deripaska, CEO of Basic Element, said giving a speech at the ceremony of a memorandum of understanding signing.
“The Russian market holds enormous potential. We look forward to a strong partnership to develop the airports in the Krasnodar region. In addition, it hopes to transfer the experience and expertise of Changi Airport Group in managing to this joint venture,” Lim Liang Song, CEO of CAI said.
The deal values Basic Element’s airport-management subsidiary Basel Aero at US$500 million, company deputy chief executive Andrei Elinson said to reporters. Singaporean CAI signed to invest US$200 million in the project, while Sberbank is financing the project to the tune of US$120 million, but expects to sell out at a profit in the medium term.
“This is a financial investment — we’re not airport managers,” said German Gref, president and board chairman of Sberbank. “We see this as a five to seven-year investment and then expect to realize a profit — primarily through an eventual IPO.”
Deripaska’s group snapped up the airports in the 2000s after seeing potential in the region’s future as a tourist destination and host of the 2014 Winter Olympics, Andrei Rozhkov, a transport analyst at Metropol, said to The Moscow Times. He added that the Russian tycoon “is approaching it as a strategic investment — that is to say, he may sell them once he’s developed them.”