S3_110930 PPP Presn_Sidharath Kapur

8/3/2019 S3_110930 PPP Presn_Sidharath Kapur

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1

Project Structuring, Development and Financing of

Delhi International Airport

Sidharath Kapur

CFO Airports,

GMR Group, India

The views expressed in these presentations are the views of the author and do not necessarily reflect the views or policies of

the Asian Development Bank (ADB), or its Board of Directors or the governments they represent. ADB does not guarantee the

source, originality, accuracy, completeness or reliability of any statement, information, data, finding, interpretation, advice,opinion, or view presented, nor does it make any representation concerning the same.


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Models of Privatization

22

Design and

Build (D&B)

D & B +

Finance (D, B

&F)

DB&F +

Maintain

(DBF&M)

DBF&M +

Operate

(DBFO&M)

D&B+Own

and Operate

(DBOO)

DBOO +

Transfer

(DBOOT)

Privatization

Ownership Govt Govt Govt Govt Private Private Private

Investment Govt Govt Govt Govt Private Private Private

Management Govt Govt Private Private Private Private Private

Private

SectorInvolvement

Subcontract

D&B

Subcontract

D & B

DBF & Asset

Maintenance

DBFM +

Operations

Own and

Operate

Own and

Operate

Own

Common Concession

Formats

Govt may retain partial

equity in SPV

Public Float,

Private Sale,

Joint Venture

Delhi International Airport a specimen of DBOOT Model


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3

Privatization Objectives - Government

Infrastructure

Required Airport Infrastructure

Milestones for Capacity Expansion

Time lines for construction

Operations

Financial and

Economic

Performance Standards

Smooth and Uninterrupted operations

Safety

Concession Fees/Equity Valuation

Government Guarantees and SupportTermination Payments

Strong Sponsors

Change of Control Restrictions

Financial Viability

Project Stability

Control and

Oversight

Regulation Framework

Change in Law

Public Interest


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4

Privatization Objectives - Concessionaire

Financial

Fair compensation to Investors for RisksCommercial Case

Reliable Business Case

Competitive Debt Financing

Transparent and Predictable Regulation that

covers Risk Based Cost of Equity and Debt Servicing

Stability

Operations

Concession Period

Long term Commitment of Government

Legal and Political Stability

Competing Airports

Government Support for Security, ATC, Services

Media and Public Perception

Cost of Operation

Independent Regulator or Concession Based Regulation

Transparent and Predictable

Commercial Expectations to be honored

Non-Utility Based Risk coverage of Cost of Equity

Ability to Service Debt

Regulation


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5

Privatization Objectives - Lenders

Bankable

Propositions

Clear Regulatory Framework

Sound and Viable Concession

Predictable Revenue Streams

Debt Servicing Ability

Compensation and Termination

Sponsors

Other Issues

Experience and Ability

Stable Shareholding structure

Financial Strength

State of Airline Industry

Direct AgreementsAbility to manage capital cost and timelines


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Delhi Transaction Agreement

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30-year concessions agreement with a further 30 year option

A mandatory Capital Expenditure program (key projects) to be completed byMarch 2010

Massive liquidated damages for non-compliance

Objective and subjective service standards

Aeronautical charges currently as per AAI rates. In future, an independentregulator (AERA) to decide

Limiting the use of land for non-Aero purposes to 5%.

Retention of all staff initially and then of a significant number even after 3-years.

ATC would still be under the control of AAI/DGCA.

First right of refusal, if within 10% of best bid for a second airport within 150 km.


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Government Support (SSA, SGSA)

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Passenger Service Fees Entitlement of Facilitation Component (35% of Fees)

Tariff Increase as per SSA Schedule 1 Hybrid Till

Clearances Assistance to take early clearances. Single window clearance

mechanism.

GOI Services Customs, Immigration, Security, Meteorological etc.

ROFR Right of first refusal in case of new airport within 150 km radius.

State Government Support Land availability for development, surface access

to Airport, supply of Utilities, Clearances


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Lifeline of Delhi Airport Project

8

Baseline AAI approvesmodernizationproposal

June 2003

Issue of RFPApril 2005

Start of New Dom.

Terminal Ops

April 2009

Terminal 3Commissioning

July 2010

Award of

Contract

Jan 2006

3rd Runway

Ops begin

Nov 2008

Court Case on the Bid

Decision

Feb 2006

Takeover of

Operations

May 2006

Delhi Overtakes Mumbai as thebusiest airport in India FY 2011

Supreme Court

Clearance

Sep 2006

Foundationstone &

Financial

closure for T3

Feb 2007

Intl. Terminalrenovation causing

passenger

inconvenience

2008

Upgrade of Intl. TerminalComplete

Jun 2008


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Delhi Airport Project - Highlights

9

Phase 1A Completed in mid 2008 Phase 1B Completed in Mar 2010

Phase I Phase V

Completion date 2010 2035

Pax capacity (mm) 60 100

Cargo cap. (mm tons) 0.5 3.6

Runways 3 4

PTB area (mm sqft) 5.5 17.2

Key contracts awarded

Design engineers: Mott McDonald, UK

Project management consultants:

Parsons Brinckerhoff, USA

3rd runway and Terminal 3: L&T

Terminal 3

Terminal 1D

Third Runway (4,430m)

Taxiways, fire stations, associated infrastructure

Upgrading of international terminal

New interim domestic terminal, T1D already commissioned

Terminal building (built-up area ~5mm sq fleet)

78 aerobridges

High speed rail link

Multi-level car parking (4,300 lots)

General aviation facilities expansion/upgrade of utilities

A

B

D

E

C

Existing international terminal building

New integrated terminal building (T3)

New runway

Existing domestic terminal

Land bank (250 acres)

A

B

C

D

E

Development plan overview over five phases Master development plan


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Airport Capacity, mppa Floor Area, sq m

Construction

Period, months

London Heathrow 28 353,000 72

Madrid 42 757,000 70

Bangkok 45 563,000 60

Kuala Lumpur 25 479,000 54

Beijing 43 900,000 52

Delhi T3 34 502,000 37

Source: Jacobs Benchmarking study, 2009

Timeline Challenges


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Minimum Connect Time

Domestic/International 60 Minutes International/International 45 Minutes

90% of all Passengers served by fixed bridges

95% of Passengers wait less than 10 minutes at each ofImmigrations, Security and Customs facility

Maximum queuing time at check in less than 20 minutesand 5 minutes for Economy & Business Class respectively

95% of passengers take less than 45 minutes for arrivals

OMDA Standard Challenges


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Seating for 80% of Gate Lounge Population

Domestic First Bag 10 minutes, Last bag 30 minutes,International First bag 15 minutes, Last bag 40 minutes

Car Parking

Average time taken to find parking space 95% of drivers takeless than 5 minutes

Average time depart airport from parking space 95% of driverstake less than 5 minutes

Taxis Maximum waiting time 95% of passengers wait less than 3

minutes

OMDA Standard Challenges


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The Initial estimate was based on certain scope which has undergone many

changes thereafter because of growth in traffic and change in specifications.

For Project cost to be finalized, first we need to have all drawings in place. These

drawings would have needed anything from 9 months to a year to be finalized.

Thereafter they would have gone for bidding which could have taken anywhere up to

6 months to finalize the construction contract and the Project cost.

Since there was no time available in view of ensuing commonwealth games a

parallel build and design philosophy was adopted.

As such all the numbers shown as project cost are costs visualized at that

stage.

The initial project cost was based on limited number of drawings and was

preliminary in nature. In this scenario, unless major packages were awarded, DIAL

was not in a position to realistically estimate the project cost revisions.

Project Cost Variation


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DescriptionInitialEstimate

FirmedUp Cost

Variance

T1, T2 & initial CWIP 762 754 (8)

Runway/taxiway/apron/ lighting 1,765 2,634 869

Terminal 3 and Associated Buildings 4,669 6836 2,167

Airport Services Building & Airport ConnectionBuilding

160 160

Preliminary, Preoperative & IDC 1,279 1,320 41

Metro 350 350 -

Upfront payment to AAI 150 150 -

Rehabilitation of Runway 10-28 110 110

Delhi Jal Board infrastructure funding 54 54

New ATC Tower with Equipment 350 350

Security Capex 139 139

Total 8,975 12,857 3,882

Figures in Rs. Crores



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Sl.No

Particulars Total Terminal 3Airside/Landside

Others

a) Area/ Volume/ Specification Variance 1,446 1015 431

b) Material Price Variation 973 705 268

c) Other Items 617 447 170

d)Addl. buildings (Airport ServicesBuilding +Airport Connection)

160 160

e) New ATC Tower with Equipment 350 350

f) Runway-10/28 Rehabilitation 110 110

g) Delhi Jal Board 54 54

h) Preliminary Preoperative & IDC 41 41

i) T1, T2 & other CWIP (8) (8)j) Security Related 139 139

Total 3,882 2,167 869 846




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Overall Cost Parameters BKK KUL PEK LHR MAD DEL Median Result

BangkokKuala

LumpurBeijing London Madrid Delhi

Terminal Size (MPPA)

Actual Cost

Total Actual Cost (in millionUS$ and documented)

2,800.00 1,600.00 3,800.00 4,100.00 2,948.20 1,659.90 2,874.10 Second

Actual cost per mppa (inmillion US$) 62.20 64.00 88.40 146.40 $70.20 $48.80 67.10 Lowest

Actual Cost / m2 of GFA(in US$)

4,973.40 3,337.5 4,222.20 11,614.1 3,894.60 3,306.50 4,058.40 Lowest

Adjusted Cost

Adjusted Total Costs (in2008 million US$)

3,354.90 3,079.50 4,213.10 4,151.20 3,353.90 2,496.30 3,354.40 Lowest

Total Cost / mppa (in2008 million US$)

74.60 123.20 98.00 148.30 79.90 73.40 88.90 Lowest

Total Cost / m2 of GFA (in2008 US$)

5,959.00 6,423.60 4,681.30 11,759.0 4,430.60 4,972.60 5,465.80 Third

Terminal 3 is the most capital efficient and economical amongstTerminal 3 is the most capital efficient and economical amongstTerminal 3 is the most capital efficient and economical amongstTerminal 3 is the most capital efficient and economical amongst comparable Terminalscomparable Terminalscomparable Terminalscomparable Terminals

Benchmarking by Jacobs


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Particulars Financial Closure Final Amount

Equity-Shares Allotted 1,200 1,200

Equity-Share Application Money - 1,250

Internal Accruals 50 50

Lease Deposits / Trade Deposits 2,739 1,471

Rupee Term loan 3,650 3,650

External Commercial Borrowing (ECB) 1,336 1,616

Development Fee (Incl additional) - 3,620

Total 8,975 12,857


Means of Finance


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Delhi Airport: Maximizing Value Through Suitable Joint Ventures

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Joint Venture & Demerger

Partner with third party to off-load assets/asset creation obligation and

consequential financing burden.

JVC obligated to arrange and manage financing.

Upfront security deposit from JV.

Collected c.USD 115 mn of security deposits Vs c.USD 45 mn of investmentoutlay.

Revenue Sharing as % of Gross Sales.

USD 440 million of assets/asset creation obligation off books.

Long term valuation creation through equity holding.

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Joint Ventures


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Funding Long & Short terms

Rupee Financing INR 36,500 million commitments

Consortium of 10 Rupee banks. Limited exposure for each bank

Moratorium of 5 years with door to door commitment of 17 years

Ease of disbursement

USD Financing USD 350 mn commitment

7 international banks in consortium of 8 banks

5 year moratorium with door to door commitment of 13 years

No disbursement for 1.5 years due to global financial meltdown

Decision to replace international banks with domestic banks for USD borrowings

Cost of borrowing increased from Libor + 175 bps to 475 bps

Short term bridge loans Gap funding to meet the ECB delay Lower financing cost @7% to 9.5%

Bullet repayment in 6 months from date of disbursement

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Funding Challenges Putting the debt together


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Comfort to Lenders

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Share Pledge Agreement 30% Pledge over shares

Non Disposal of Shares and Safety

Net Arrangement Agreement

21% NDU over shares

Deed of Hypothecation First charge on all the revenues / receivables

Airport Operator Direct AgreementAssignment of Insurance Policies

First charge/assignment of all the rights;titles, permits, etc. of the Project Document

Substitution Agreement In the event of default lenders can

substitute operator with some other entity.

GOI Guarantee as per SSA GoI guarantying transfer payment shortfall

in the event AAI doesnt pay.


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Delhi Airport 2008 Credit Crunch

Early 2008

T1 & T2 under operations

Modernization and new integrated terminal T3

Under construction

World record time lines-37 months

Contracts awarded at peak in 2007

Design & Build process Cost plus

Financing tied up Dec 07 Indian &

Foreign Lenders

46% Committed revenue share

Traffic increasing at steady pace

Int Pax @9% , ATM @5.62%

No regulator in place

Land Bank of 250 acres-partly to be used for

financing modernization and expansion Airlines flourishing - New flights, destination

added

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2008 End

Challenges on both top & bottom line Traffic declined

Real estate market crashed leading to fund

gap of $ 400 mn

ECB draw down held up $350 mn

Inflation causing project cost over runs Committed revenue share payment to AAI

Maintenance of highest service standards

irrespective of cost

Delay in DF approval

Funding Challenges 2008 Credit Crunch


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Land Monetization

Pure land monetization instead of self-development

Upfront deposit 3 times Avg. Annual Rentals vs 6 years AAI requirement

Mid 08, bid open for 45 acres land monetization

Un favorable response from market - deferred for 15 acres

Realized better rates higher by ~30%

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Asset Areas

Area in

acres

Advance Lease Deposit

USD Mn

First Round 30 186

Second Round 15 134

Total 45 320

Land Monetization


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DF approval by Government to fill funding gap from funding from Land monetization

Separate revenue stream securitized to bridge financing gap without impacting long

term debt/equity or DSCR.

Consortium of 7 Indian banks

Repayment of securitized loan from DF collections

24

Passenger type Tickets purchased in INR

(including taxes & levies)

Domestic Sectors INR 200 per departing pax

International Sectors INR 1,300 per departing pax

Period 36 months effective 01 Mar 09

Aggregate Amount ~ USD 400 mn first tranche

(NPV basis)*

Delhi-Securitization of Development Fee (DF)

*Second tranche of DF is pending regulator approval


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Delhi Airport: Creating world-class capacity forIndias busiest airport

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Land side facilities

168 check in counters

Multilevel Car Park Facility for 4,300

cars & Surface Parking 2300 cars

Retail area of 30,000 sq. m

Air side facilities

75 Aerobridges

48 contact stands

9 remote parking stands

Brief project overview Financing (USD bn)

Key recent developments

Concession period of 30 years + option for

another 30 years at the option of DIAL

45.99% revenue share with AAI

5,100 acres of total land available for

operations and development

ROFR till 2036 for a second airport within 150

kms of the existing airport

ROFR with the existing consortium partners in

case of exit by an existing partner

54.0%26.0%

10.0%

10.0%

T3 key project features

Completion of Phase IA ahead of the planned schedule

Construction of Terminal 1D, and up gradation of 1C, 1D & T2

completed

Longest runway in the country

New runway (CAT 3B lighting for landing at 50m visibility, can

accommodate A380s) and taxiways completed 6 months ahead of

schedule

Phase-IB: Development of New Integrated Terminal (T3) complete

Installation of aerobridges, travelators, baggage handling and

cooling systems completed

Contracts for duty-free/retail awarded for T3; other major non-

aero contracts awarded

Consortium partners

Airport Capacity Time

Changi Airport Singapore

(T3)

22 Million 76 months

Heathrow T5 L ondon, UK 25 Million 60 months

Beijing Airport New terminal

for Olympics T3, China


IGI Airport T3, New Delhi,

India



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Operational Challenges

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Challenges Mitigation

Loss of Job for govt. employees Retention of all staff initially and then of a significant

number even after 3-years

To get in sync over 50 agencies MoCA, AAI, BCAS, DGCA, Airlines, Electricity, Water,Environment, Health, CISF, DDA, NHAI, HUDA, Cargo,

Customs, Cargo, Agriculture, Oil Cos., Metrological etc.

SLAs with govt. operated

activities like ATC, Customs,

Security

Educating and accounting various organization.

Winning the trust

Negative perception of Joint

Ventures

Educating of OMDA rights

Educating of global practices


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Operational Challenges:Constant endeavor to improve passengers experience

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Commercialoperations from

T1D begun in

April, 2009

Commercial operations

from T3 Internationaloperations from Jul10 &

domestic operations from

Nov10

DIAL received accolades from GoI & travelers for efficient airport operations

during evacuation of Indian nationals, many without valid travel / citizenship

documents, from Egypt & Libya

ASQ Score

Ranked 101st

(out of 101) in 2007ranked 12th

(out of 154) in 2010airports worldwide

S3_110930 PPP Presn_Sidharath Kapur

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