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RDIF part of Vladivostok Airport share purchase

An RDIF-led consortium including Singapore’s Changi Airport Group and Russian industrial group Basic Element has won a tender to co-own the airport.

The tender for an acquisition of shares in the modernised Vladivostok airport, one of Russia’s strategic aerial gateways to the East, has been awarded to a consortium comprising: Moscow-based sovereign wealth fund (SWF) the Russian Direct Investment Fund (RDIF); Basic Element, a Russian diversified industrial group; and Changi Airports International (CAI), a wholly-owned subsidiary of Singapore-based airport operator Changi Airport Group.

The share acquisition is worth approximately 6 billion rubles (€87.7 million; $99.8 million) and is the third equity financing arrangement recently sealed by RDIF aimed at better connecting the country internally and internationally. It follows two agreements signed last December: a 25 percent equity co-investment commitment to State Company Russian Highways (Avtodor) to form a transport-focused platform; and a partnership sealed with the government of Khanty-Mansiysk Autonomous Okrug–Ugra to jointly develop investment projects and attract foreign investment into the region, focusing on oil and gas processing, timber, real estate, power generation, mining and agriculture.

“With an Open Skies policy in place, this airport [Vladivostok] has the potential to become a key Russian hub within the Asia-Pacific transportation and logistics network. Over 400 million people live within two hours flight of Vladivostok. The transportation hub will promote economic development in the region at every level,” said RDIF chief executive Kirill Dmitriev in a joint statement.

“Vladivostok is the biggest economy in the Far East of Russia and has been identified to be developed as Russia’s strategic gateway to economies in Asia Pacific. We see long-term potential in our investment and will work with all parties to develop the airport into an important aviation hub in the region,” added CAI chief executive Lim Liang Song.

“Basic Element has done a lot for the development of the airports in Krasnodar region and has successfully provided a smooth service to passengers of Sochi International Airport, the main port of entry to the Winter Olympic and Paralympic Games,” added Gulzhan Moldazhanova, Basic Element chief executive. “Together with our partners in the consortium, we’ll achieve equally impressive results in Vladivostok International Airport by providing highly efficient and smart management, ensuring security, comfort and high standards of servicing aircraft.”

In a written exchange with Infrastructure Investor, an RDIF spokesperson said the consortium was able to outbid competitors on the basis of a strategy to position Vladivostok International Airport as an international hub in Eastern Russia, with the participation of leading Asian airlines, entailing an increased number of flights between Vladivostok and the Asia-Pacific region. Fifteen new flight routes are programmed including to India, China, Vietnam, Indonesia, Malaysia, and Singapore, among others. Targeted traffic growth is 5 to 10 percent per annum.

In 2012, Vladivostok’s aerodrome underwent large-scale modernisation and expansion with the construction of a new terminal and facilities to host all types of aircraft, which has enabled passenger traffic to grow steadily from 1.4 million per annum in 2011 to a little under 2 million in 2014, representing yearly growth of 10 percent.

Each of the three members will hold an equal share of 33.3 percent. For its quota, RDIF will include leading investors from the Middle East which participate in RDIF deals as part of its co-investment platform.

“Four large investment funds from the Middle East including the leading sovereign wealth funds of the region expressed their intention to join this deal as part of RDIF's automatic co-investment mechanism,” said the RDIF chief executive in a joint statement.