Finnish building and infrastructure firm LemminkÃ¤inen has decided to pull out as developer on a vast residential scheme in St Petersburg because it is too risky in light of Russia’s economic crisis.
The $2.1-billion-turnover company had entered a binding framework deal with Finnish property firm Lipsanen & Co in 2011 to build 2,000 residential units plus office and retail space on Vasily Island, downtown St Petersburg.
The scheme, called Ilmatar, was valued at approximately $430m (€400m) at the time.Â
Demolition of existing industrial buildings was to have started in 2011, and the first phase was to be finished last year.
Yesterday, however, LemminkÃ¤inen said it was pulling out.Â
"The decision is impacted by the uncertainties in the operating environment and weakened economic situation in Russia as well as the risk level of the project for LemminkÃ¤inen," the company said in a statement, adding that it and Lipsanen & Co. were "negotiating alternative ways to carry out the project".
Other construction projects in St Petersburg and Moscow, and LemminkÃ¤inen’s paving businesses there, will carry on, the company said.
At the end of 2014, LemminkÃ¤inen had 755 employees in its Russian operations and the net sales were $210m.
In 2012 the firm identified Russia as a major market, the one returning the greatest growth in total volume of construction.Â
But in July 2014, by which time the US and the EU had instituted their third round of sanctions against Russia over the Ukraine crisis, LemminkÃ¤inen said it did not expect net sales in Russia to increase in the next few years.