Fri | Oct 19, 2018

GAP lands NMIA bid - Airport concession deal to close in November; Jamaican conglomerates lose out

Published:Wednesday | September 12, 2018 | 12:00 AMAvia Collinder/Business Reporter
The Norman Manley International Airport in Kingston.

Two Jamaican conglomerates were denied the opportunity yet again to invest in what would have been a new area of business for them - airport operations.

The Development Bank of Jamaica (DBJ) has chosen a Mexican firm for the Norman Manley International Airport (NMIA) concession, which will serve to deepen its lock on the Jamaican market and, if the negotiations end in a deal, will have control of the two largest international airports.

As the provisional preferred bidder for the NMIA public-private partnership, Grupo Aeroportuario del PacÌfico SAB De CV - GAP - will now enter into negotiations with DBJ on a potential 30-year agreement, inclusive of a capital investment programme.

GAP already has 74.5 per cent control of the Sangster International Airport through consortium MBJ Airports Limited in partnership with Vantage Group of Canada.

Asked what synergies were under consideration for the two airport assets, MBJ Airports, citing protocol, said GAP had not formally advised it about the selection, but was willing to speak to the issue later.

The Jamaicans, who themselves had teamed up with foreign operators with expertise in airport operations for the NMIA bid, are taking the loss in stride.

DBJ said Tuesday that it received three bids for the NMIA concession from:

• Grupo Aeroportuario del PacÌfico SAB De CV;

• Corporacion del Este SAS - a consortium consisting of Corporacion Aeroportuaria del Este SAS, Corporacion Aeroportuaria Kingston SAS, China Harbour Engineering Company Limited, Gulfstream Petroleum SRL, and Jamaica Producers Group Limited; and

• Egis Projects Consortium - consisting of Egis Projects, GK Capital Management Limited, Sagicor Investments Jamaica Limited, and Razel-Bec.

It was the bank's second try at privatising the asset. The first attempt fizzled as prospective investors said the terms were not attractive enough.

"We feel that it is important that Kingston has a strong, well invested and globally competitive airport, and that the divestment will deliver good financial results to government. We trust that GAP was selected on that basis and wish them every success," Jeffrey Hall, CEO of Jamaica Producers, said Tuesday.

Jamaica Producers is currently heavily invested in cargo port operations, as the primary owner of Kingston Wharves Limited, and had hoped to expand its logistics footprint beyond the seafront.

"The importance of Kingston was the basis on which we participated in the bid. We still want that for Jamaica and wish GAP every success in achieving those objectives," Hall said.

Initial interest in NMIA had come from nine entities, of which eight were prequalified to place bids. Less than a third of them followed through. DBJ did not disclose the size of the winning bid, nor did it say what gave GAP the edge over the other two contenders.

However, earlier in the process, a DBJ official had disclosed that the selected concessionaire would be expected to invest at least US$110 million of capital in upgrades over time. It was reported as one of the revisions to make the airport more attractive, the initial bid having sought US$134 million of investment.

The state-operated development bank said Tuesday that the NMIA concession would run for 25 years, with an option to extend the arrangements by an additional five years. The privatisation committee was led by Paul B Scott, the chairman and CEO of Musson Jamaica and former president of the Private Sector Organisation of Jamaica.

During the concession period, the private operator will be responsible for fully operating NMIA and improving the efficiency of both landside and airside operations, financing and completing the planned modernisation and expansion and maintaining and upgrading the facilities of the airport.

The negotiations are expected to wrap up and the concession agreement executed by November.

NMIA, as indicated on its website, caters to more than 1.7 million passengers annually, and handles over 70 per cent (17 million kilogrammes) of Jamaica's airfreight.

The most recent financial results for the airport, which is operated by the Airports Authority of Jamaica through NMIA Airport Limited, related to fiscal year ending March 2017 when its annual profit shrank dramatically by two-thirds from US$16.4 million to US$5.2 million.

Revenue rose slightly from US$37 million to US$38 million.

The report also indicated that aircraft movements ranged annually between 20,000 and 22,300 over five years, and the three airlines bringing in the most passengers were JetBlue, 24 per cent; Caribbean Airlines, 22 per cent; and American Airlines, 20 per cent.

The new concessionaire is expected to grow the business flowing through the airport.

NMIA's 2017 balance sheet estimated the value of the airport's primary fixed assets at more than US$113 million.

avia.collinder@gleanerjm.com