ACI-NA/World Conference & Exhibition PPPs: Will it work for your Airport? Dr. Yiannis Paraschis CEO Athens International Airport & Chairman ACI World September 12 th 2012
Forms & level of privatisation may vary Management Contracts (Public retains ownership) Terminals Full Airport Concessions (Public shares ownership time limited) Leases BOT/BOOT/DBOT Privatisations (Public transfers ownership) Trade Sale IPO 2
What are governments trying to achieve through PPPs? Reduction/transfer of risks (sometimes at any cost ) Construction risk Traffic & revenue risk Operational risk Access to private financing Improvement of operations, service quality and transparency through private sector expertise Increased competition Economic returns (fees, dividends, indirect economic impact, etc.) 3
Airports represent 13% of global transportation PPP projects Total Investment in Transport PPP Projects Globally (2003-10) Total Value: $151bn Roads 57% Railroads 10% Airports 13% Seaports 20% Source: PWC from World Bank 4
Most Privatisations in Europe, very limited in N. America Airport Privatisations Worldwide 450 450 Middle East: 4 North America: 14 Africa: 26 Freehold 152 98 Asia Pacific 136 Latin America Concessions 251 170 Europe Management Contracts 47 Source: ACI 5
Private airport investment boomed during last decade 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Limited number of privatisations until mid-nineties Increased during 1996-2001 and took off during 2005-2007 Slow-down due to macroeconomic crisis after 2008 Investment in Airport Projects with Private Participation 1997-2008 ($, m) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Source: IFC from Private Participation in Infrastructure Database 6
The Athens Airport PPP case Hellenic Republic Asset Development Fund 30.00% Greek State 25.00% Ministry of Economy & Finance Ministry of Infrastructure, Transportation & Networks Hochtief Airport 26.67% Hochtief Airport Capital 13.33% Hastings Fund Mngt (Australia) Caisse de dépôt & placement du Québec (Canada) KfW-IPEX Bank (Germany) Copelouzos Family 4.99% 1996-2026, (5+25) year BOT concession contract (ADA) ADA ratified as Law 2338/95, provides for extension A 2.2 billion Euro Project User recovery principle 7
Key milestones on the Athens project 1975: Decision of the Greek Government to build a new airport 1978: Selection of Spata as the location of the new airport 1991: Tendering Process under BOOT scheme 1993: Private Consortium under Hochtief declared winner (60/40) 1994: Renegotiation of tender (45/55) 1995: Airport Development Agreement (ADA) 1996: Establishment of Athens International Airport S.A. 1996: Identified Construction Contract 2000: Delivery of ICC project 5 months ahead of schedule 2000: Commencement of operational tests and trials March 2001: Relocation Project from Hellinikon Airport 28 March 2001: AIA commences Operations 9/18/2012 8
The contractual model of Athens PPP Greek State 55% 45% Private Consortium Imperium/Grantor Shareholders Shareholder Advisors Regulator Lenders Contractor EIB Commercial Banks Independent Engineers 9
With State funding through EU Cohesion Fund at just 7% of total Project cost 60% funded by EIB and Commercial Loans EIB 997m Loans 1,325m Greek State Grant 150m EU Grant 250m ADF 301m Grants 701m Equity 180m Private Shareholder Equity 135m Commercial Loan 328m Private Shareholder Loan 45m 10
A clear role of the Airport Company A new airport company created from zero base A commercial, profit-oriented company of the private sector run by a Board of Directors: (4) Private Shareholders, (4) Greek State, (1) Independent, and CEO proposed by the private shareholders, A very wide corporate scope of commercial rights and services, A right to set Airport charges under Dual Till with 15% RoE cap, An option to be listed in the stock exchange Active Infrastructure Manager + Airport Marketing + IT&T Provider 11
Demonstrating strong traffic performance until 2008 ΑΙΑ Pax, million 18 17 16 15 14 13 12 11 European airports 2001-7 CAGR 6.1% 995 990 10.2 11.8 12.2 1,352 1,232 1,314 1,423 1,435 1,149 16.5 16.5 1,056 16.2 13.7 14.3 15.1 AIA 2002-7 CAGR 6.9% 2008: Recession starts/high fuel prices AIA -0.4% Europe +0.7% 2009: Europe in recession AIA -1.5% Europe -5.5% 1,400 15.4 2010: Europe exits recession/gr eek financial crisis AIA -5.0% Europe +3.6% 1,503 14.5 2011: Greece in deep recession AIA -6.2% Europe +7.3% 1,600 1,400 1,200 1,000 800 600 400 Europe Pax, million 10 200 9 Apr-Dec 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 AIA Traffic Europe Traffic From 2008 onwards, the recession -with different timing vs. Europe- affects AIA traffic Greek financial crisis impacts AIA from 2010 0 12
, m Income for Greek State 871 mil; three times higher than private shareholders Total 2002-2011 1,169.4 m Greek State 871.4m Private 263.8 250 Shareholder 298.0 m 200 150 146.2 166.1 149.4 161.8 100 50 0 101.9 63.3 65.5 43.1 8.2 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Greek State Tax Greek State ADF Greek State Dividends Private Shareholders 13
From Infrastructure to Business Community Infrastructure Business Entity Airport Business Community Impact on Economy and Society 2 Runways 24hour operation 21 million passenger capacity Aeronautical 15 million passengers Business 4,9 million visitors Commercial Business 300 Companies Profitability 5,000 Suppliers CSR 15,000 Employees 14
An Airport City has been developed.with potential for more Train Station 2003/04 Leroy Merlin IKEA & Electronics Store 2006 Exhibition Centre - 2009 2004 Factory Outlet -2005 Cargo & Catering 2001 Offices - 2001? Solar Park 2011 Airport Hotel 2001 Terminal Retail Area 2001
With a wider socio-economic impact A 2009 Study by Athens University of Economic & Business on the impact of Athens Airport on the Greek Economy Airport annually creates 4.89 billion economic added value from direct, indirect, induced and incremental tourism effects Airport creates more than 63,000 jobs on local, regional and national level Airport added value represents 2.14% of Greek GDP Largest engine for economic growth and job creation in Greece 16
Lessons learned Set up and tender is a difficult lengthy political process Financing secured but not cheap, construction on time and on budget major upgrade in efficiency, service levels and commercial orientation through new private sector company Despite lower traffic compared to the bid, much higher yield for shareholders due to non-aero profits Airlines like infrastructure and operations but dislike charges No level plain field with other public airports In times of economic downturn political debate over business model 17
Private sector involvement seems to improve effectiveness of the airport business, but Tender Glory is not Business Glory Reality will always be different from tender and contractual assumptions Construction-linked PPPs have high upfront risks with long-term implications Single PPPs inevitably lead to sector privatisation, which requires fair sector regulation Balancing the conflicting interests of the public sector (public income vs. user charges and macro vs. micro) is key to long-term success PPPs will always have to be adjusted and renegotiated in their lifetime b 18
With sustainable revenue growth and healthy cash position & profitability Revenues m 450 350 250 150 50-50 420.5 419.5 406.4 379.5 350 399.3 343.9 329.8 331.7 356.5 300 227.4 271.5290.8 220.5 250 176.8 163.7 267.0 243.9 200 227.5 124.9 150 99.3 145.8 105.8 104.0 94.6 125.7 149.6 152.5 158.5 100 129.5 94.8 50 28.9-9.6 14.3 29.0 47.1 61.8 0 Apr- 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E -50 Dec 2001 Revenues Closing cash PBT PBT & Closing Cash m 2002-11 shareholder dividends 679 million 2001 10 month 2001-2005 PBT is based on GAAP 2006-2010 PBT is according to IFRS 2009 PBT & Revenues excluding once-off provisions impact of 112 m and 91.5 m respectively 19