More than 20 prospective investors attended the pre-bid conference of the government’s airport privatization scheme held a few days earlier in New Delhi, said a person who had attended it.
The prospective investors included GMR, which operates the airports in Delhi, Hyderabad and the Philippines, GVK, which operates Mumbai airport and two more in Indonesia, the Adani group, and foreign PE investors such as Australia’s Macquarie, Italy’s Atlantia and Canadian asset management company Brookfield, said the person cited above. A representative for Flughafen Zurich AG, the operator of Zurich airport, also attended the meeting, the person said.
The pre-bid conference is part of the government’s move to invite the private sector to place bids for six airports, including Jaipur, Ahmedabad, Lucknow, Guwahati, Thiruvananthapuram, and Mangaluru, which are run by the Airports Authority of India (AAI). The last date for submission of bids is 14 February and the letter of award will be issued on 28 February.
“At the pre-bid conference, interested parties raised questions about the bidding process, the deal structure, and revenue models. We expect to receive clarifications soon as the commercial bids have to be submitted by 14 February," the person said.
Mint has reported that redevelopment of these airports may attract investments worth $1.4 billion with entities such as German airport operator AviAlliance, Singaporean airport operator Changi Airports International, US financial investor Global Infrastructure Partners, Sydney-based investment manager AMP Capital, Anil Ambani’s Reliance Infrastructure, the National Investment and Infrastructure Fund, and the Adani group, besides GVK and GMR.
Representatives of the Kerala State Industrial Development Corp. Ltd (KSIDC) also attended the pre-bid conference. The state government, through KSIDC, enjoys the unique advantage of a first right of refusal in the bid process.
“The Kerala government can retain control of the asset instead of handing it over to a private party if it makes an offer within a 10% range of the highest bidder," a person advising one of the bidders said. “For instance, if a private player offers ₹50 per passenger to AAI and this is the highest bid, then KSIDC can retain the asset if it offers at least ₹45 per passenger to AAI instead."
“There are four clear reasons for significant interest," said Jagannarayan Padmanabhan, director and practice leader, transport and logistics, Crisil Infrastructure Advisory. “The private sector has had positive financial returns in the privatization of the previous four airports, namely Delhi, Mumbai, Bengaluru, and Hyderabad. The current assets are operational profit-making assets with fairly predictable cash flows. Hence they are de-risked and have good headroom for growth as air travel penetration levels are still very low.
“In addition, the deal structure is finely balanced," he said. “The government is offering a long concession period. A medium ticket size of investment on a per airport basis leading to wider participation and good operational flexibility has been provided in the draft concession agreement."
AAI is offering a concession period of 50 years to the winning bidder, who will be responsible for operations and management of existing airport assets as well as for designing, engineering, financing, constructing and developing the additional air-side, terminal, city-side and land-side infrastructure for the airport.
The winning bid will be decided on the basis of the highest monthly per-passenger fee to AAI, a departure from the much-contested revenue-sharing model that AAI had adopted in the case of the currently privatized airports.