Mar 2017 Financial News

GraceKennedy reconsiders Norman Manley International NMIA bid

Mar 15, 2017

Don Wehby, group CEO GraceKennedy Ltd, indicated Monday that the company’s subsidiary, GK Capital Ltd, is currently in the process of evaluating the revised terms on offer for the Norman Manley International (NMIA ) Public-Private Partnership (PPP).

The Government of Jamaica, through the Ministry of Transport and Mining, is seeking a private sector operator to operate, finance, and develop the NMIA under a long-term concession agreement. The selected party is expected to complete the modernisation of the airport, which is the second largest in Jamaica.

It is the GOJ’s second attempt to do so. In early 2015, the companies which pre-qualified under its first offer were: Cedicor SA (Aeropuertos Argentina 2000 SA); Zurich Airport International AG and A-Port Chile SA; Korea Airport Corporation Latin America (KACLA) and GK Capital Management Ltd; China Harbour Engineering Company Ltd, and DAA International Ltd and Corporación Aeroportuaria Del Este SAS del Este SAS (Punta Cana International Airport), Jamaica Producers Group (JPG) Ltd and GBG Energy S de RL.

However, none submitted a final bid. Wehby told the Jamaica Observer that the subsidiary is considering submitting its bid for prequalification for a second time. The prequalification application submission deadline is on April 3.

GK Capital, the group CEO said, has been in dialogue with international parties “that have expressed an interest in working with us to secure the long-term concession agreement.

“Over the next few weeks we will make a final decision on our participation in the bidding process and advance discussions with our potential partners.”

Wehby said the company “is encouraged by the changes to the structure of the transaction that have been made by the DBJ and the Government.

“In particular, the reduction of the required Capex programme and the lowering of the upfront fees have been viewed as positive changes.”

The new transaction proposes capital investment of US$109.73 million (down from US$120 million) of which US$77 million is assigned to capital works and the remainder to maintenance.

The group CEO noted, “GK Capital has been very active in the infrastructure financing space. We view the NMIA PPP as an attractive opportunity to continue our team’s focus in this area. From a broader strategic perspective, we also see the logistics space as an area of potential growth for Jamaica.”

GK Capital previously applied for the concession with international partner KACLA, the Latin American subsidiary of Korea Airports Corporation (KAC).

Under the original proposal, the selected investor was expected to invest at least US$120 million — in a 500-metre runway extension, runway rehabilitation, and ICAO compliance projects in the first seven years of the concession.

GK said then that the decision was taken not to bid, with considerations including the significant capital expenditure requirement and the concession fee structure.

Wehby told the Business Observer, “The main issues were related to KAC’s ability to meet its required return on investment with the level of synergies expected from the integration of NMIA with its Colombian operations.”

In the new proposal, the Information Memorandum says that beyond the first three years of the concession, indicative capital investment needs will likely be limited to ongoing major maintenance works, regulatory and performance compliance works and potential improvements to accommodate more long-haul routes.

Queries sent to Jamaica Producers, the other local company which previously expressed interest in the transaction, were not answered up to press time.

The GOJ proposes that through a combination of passenger growth, strong revenue, and operating expenditure optimisation opportunities, the profitability of the business can improve driving EBITDA margins above the 50 per cent level and in line with other airport operators in the region.

In FY 2015/16, NMIA achieved what operator the NMIA describes as a record EBITDA performance compared to the previous years, reaching US$17.5 million.

NMIA said the results reflect considerable efforts to increase revenues and reduce operating costs.

Passenger markets served from NMIA in 2016 included North America, accounting for 76 per cent of total international scheduled seats, followed by the Caribbean and Latin American markets with 19 per cent.

 

Source:
BY AVIA COLLINDER
collindera@jamaicaobserver.com
Business reporter 
Jamaica Observer
Wednesday March 15, 2017

http://www.jamaicaobserver.com/business/GraceKennedy-reconsiders-Norman-Manley-International-NMIA-bid_92504