City Hall Pulls Out of Skyscraper, Redirects Funds to New Stadium

By Irina Titova

Staff Writer

Published: January 13, 2009 (Issue # 1439)

Russia’s gas giant Gazprom will complete the construction of its Okhta Center skyscraper in St. Petersburg, and City Hall will fund the construction of the new stadium for local soccer team Zenit.

The news of these financial changes was announced at the end of December, when Gazprom head Alexei Miller said that Gazprom would buy all the shares in Okhta Center from the city of St. Petersburg.

Miller said Gazprom would finance 100 percent of the construction project.

St. Petersburg Governor Valentina Matviyenko said that the cost of the shares would be settled soon, and that Gazprom would repay the city the funds it had invested into the project, news agency RBK reported.

Initially, Gazprom was to cover 51 percent of the project, while City Hall was to finance the remaining 49 percent. The property rights were to be split between the co-investors according to the volume of financing.

Under the previous plan, the St. Petersburg budget was to cover 29.4 billion rubles ($947 million) of expenses. The full financing of Okhta Center is estimated at 60 billion rubles ($1.9 billion).

The Okhta Center project includes the construction of buildings on a territory covering 66.8 hectares, where 4.6 hectares is allocated for the skyscraper. The 396-meter-high tower, which has provoked a number of debates in the city, is to be built on the Okhta river embankment by 2012. The complex itself is to be completed by 2016.

Experts say that the current financial crisis is, ironically, a good time for Gazprom to cut investment into the project.

“Today the construction expenses can be reduced by 15-20 percent,” said Artyom Tsogoyev, commercial director of Galaxy Group, MetalBuilding.ru reported.

Tsogoyev said that in the fall of 2008, the price of construction materials fell — by 50 percent for cement, 20 percent for metal and metal construction, and 5-10 percent for sand and other materials.

The city also clarified its position on the construction of another strategic object — the new stadium for St. Petersburg’s soccer club Zenit. City Hall will take full responsibility for its construction and Gazprom will leave the project.

Initially it was planned that Gazprom, which owns Zenit, would pay 51 percent of the project’s cost. The rest of the sum was to be provided by City Hall. However, after Gazprom declined to help further with the financing of the soccer stadium, the St. Petersburg administration decided to complete construction itself. It plans to spend the money originally allocated for the Okhta center on that purpose.

The stadium will be constructed by Transstroi engineering corporation, which is part of Oleg Deripaska’s Basic Element holding. The corporation won the tender at an auction in December, when it promised to lower the cost of the project by up to 30 percent.