/ 13 February 2006

SA group wins $1,5bn Indian airport contract

A consortium consisting of Indian infrastructure group GVK and South African companies Airports Company South Africa (Acsa) and listed industrial group Bidvest have been awarded the contract to modernise one of India’s two main airports, Mumbai International airport.

The contract — valued at $1,5-billion — is to modernise, operate, develop and manage Mumbai International airport to achieve world-class standards.

The consortium will partner the Indian government, which will retain a 26% shareholding in the airport during the concession period of 30 years with an option for a further 30 years. The consortium interest is split GVK 37%, Acsa 10% and Bidvest 27%.

“From now onwards, further engagements will be aimed at finalising the transaction and preparing for the transfer of the airport.

“Acsa will roll out its intellectual know-how consisting of policies and procedures, information technology solutions, total quality management, environmental management, maintenance and engineering, safety, service standards, capacity planning and master plans, project management, route and traffic development and stakeholder management,” said Acsa MD Monhla Hlahla.

She added that in terms of human resource development, Acsa will provide technical exchange programmes as part of its skills transfer initiatives within various functional areas.

She said the learning experience will be a two-way process for Acsa and Mumbai International airport employees. Through these initiatives, Acsa will clearly gain invaluable experience from exposure to the Indian environment. This transaction will therefore enrich all employees and partners involved.

Furthermore, it stands to create job opportunities within Acsa as seasoned professionals are posted to Mumbai on an ongoing basis.

“Another area of focus where we believe we will extract value for the government of India is through non-aeronautical commercial activities, as Acsa is particularly well positioned to realise an all-encompassing commercial transformation for Mumbai International airport.”

The growth of commercial revenue has contributed significantly to Acsa’s financial success over the years. It has grown by 364% in the past eight years at a rate nearly three times that of the company’s aeronautical revenues. In the financial year ending March 31 2005, the commercial division contributed 45,5% of total group revenues and 76,6% of Acsa’s headline net operating profit, Hlahla noted.

Hlahla said Acsa’s role will be that of an airport operator, which is to rehabilitate, develop, operate and manage the airport on behalf of the concessionaire.

“For Acsa, this acquisition will significantly enhance the growth of the company over the concession period, especially with the high traffic growth rates forecast in Asia. Mumbai is the commercial capital of India and one of the 10 largest cities globally, with about 18-million inhabitants. The predicted growth of air traffic in India is enormous, borne out by the aircraft orders placed by airlines as well as the increase in living standards in India,” she added.

With regard to the selection of GVK as a partner, Hlahla said that after a thorough and comprehensive process, GVK was selected as the South African consortium’s partner for the bid.

“The choice of GVK as a partner was primarily due to their commitment to the project, their experience in Indian infrastructure projects — particularly in the power sector, toll roads and urban infrastructure, their successful partnerships in the past with credible international partners such as the IFC, their ability to raise debt finance in the Indian market, their approach of an equal partnership with the South African consortium and their shared values regarding corporate governance.” — I-Net Bridge