New $450 Million Airport Terminal Highlights Croatia’s Private Sector Development

Croatia’s new $450 million terminal at Zagreb International Airport, built by a consortium supported by IFC, has already won a slew of awards, and once completed is expected to spark meaningful economic growth.

The new, 65,000-square-meter terminal is to begin construction later this year, targeting completion in 2017. It will more than double the airport's capacity, from 2 million to 5 million. It will also improve the country's infrastructure, boost tourism, a major driver of employment in Croatia, and bring in more businesspeople and potential investors from the region and beyond.

"The expansion of the Zagreb airport will bring various positive effects to Croatia's tourist industry, not only to Zagreb," said Mari Matesic, Director of the Croatian National Tourist Board. "Apart from the increased revenues generated from tourism, we also expect to see an increase in city tours and business visits before and after the main tourist season."

For the first time in Croatia, private firms involved in a transport concession project have assumed passenger volume risks, enabling the country to upgrade essential infrastructure without adding a burden to state finances.

This is a clear signal of a stronger, more mature private sector, according to Pavlo Grabovets, IFC’s Senior Investment Officer in charge of the equity part of the transaction. “This is not only the first airport concession in Croatia but also the country's first traffic risk transport concession,” said Grabovets. “We hope it will serve as a model for similar transactions in the region.”

In February, the deal, which also includes Aeroports de Paris Management, Bouygues Batiment International, TAV Airports, Viadukt, and Marguerite Fund, won the European airport deal of the year 2013 from Project Finance Magazine. In April, EMEA Finance magazine named the Zagreb terminal the Best Project Finance Deal and the Best PPP in Central and Eastern Europe.

The concession includes financing, design, and construction of the terminal, along with airport operation until 2042. IFC is committing as much as $73 million to the project, including a loan of up to $47 million and an equity investment of nearly $26 million.

The project comprises a total investment of around $450 million, $330 million for the design and construction of the new terminal and $120 million for the maintenance of the airport infrastructure. Apart from IFC, the lenders for this project included the European Investment Bank, Unicredit Bank Austria, and Deutsche Bank.