Académique Documents
Professionnel Documents
Culture Documents
Dwianto E. Winaryo
Transport Director of Committee for Acceleration of Priority Infrastructure
(KPPIP)
Curriculum Vitae
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Limited Concession Scheme (LCS) as an alternative for
infrastructure funding
§ Can receive additional incentives in the form of revenue- Brownfield assets* or
sharing already operational
Government remains owner LCS limits “super-profits” for Government will receive
of the asset concession holders additional revenue
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LCS Provides Greater Value than Securitization
Securitization is a DEBT of Govt/SOE while LCS is an investment by private sector
LCS Securitization
Government LCS does not give No Yes
Debt rise to Government Government faces no ongoing Government will be responsible
Liability debt obligations financial obligations. for making annual interest and
principal payments
Future LCS frees Borne by the Private Sector Borne by the Government
Downside government from Government receives upfront Government retains all risk of
Risk default risk asset funds for future expected future underperformance
performance in the performance improvements AND
future participates in revenue sharing
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Soekarno-Hatta International Airport is an ideal pilot project to
implement the first LCS in Indonesia
Strong flight demand, but not capturing growth… …needs to implement world’s operational best practice
According to Airport Council International Global operator sees the potential to develop SHIA as
(ACI), SHIA is one of the busiest airport in international and regional hub airport
the world (SHIA fell from 9th place (in 2012)
to 18th place (2015), compared with Changi SHIA still lags among regional competitors in terms of
consistent in 16th place) revenue per passenger regardless of nearly the same
number of passengers
Revenue per Passenger
Needs of significant capital investment to
develop the 3rd runway and the 1st and 2nd
terminals renovation (~IDR 10 trillion)
IDR 74,000 IDR 189,000 IDR 294,000 IDR 367,000
Global operators have experience on working with Apart from any improvement conducted, SHIA’s
airlines to develop new routes and improving operational margin is still lagging behind regional
airport services according to airport’s standards competitors and a large number of privately-run airport
which was ranked top as SHIA.
Margin EBITDA
Airport Country
(H1 2015)
Passengers movement Cargo movements
2011-2015 (million) 2011-2015 (ton thousand) Sydney Australia 82.1%
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SHIA LCS Illustration (1/2)
Upfront payment provides Profit sharing limits “super Concessionaire will be
significant amount of profit” for privates and ensures responsible for all future capital
cash injection to the government participation in expansion, which will be
government future upside defined in the Concession
Agreement
18.0x 45,000
*Based on world transaction data and EBITDA 2015 or Rp 2.44
Debt Providers Equity Investors trillion
(75% or more) (0-25%)
The amount of the payment range is assumed to remain moderate annual payments. The government can change the range of fixed
payment to meet the internal criteria (e.g. a lower ongoing payment means an increase in upfront payment)
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SHIA LCS Illustration (2/2)
…cash flow at operational period, with payment priority to the government, mandatory
capital increase, and Dividend Payment
Airport Revenue
Concessionaire
Note: Payments to Government and Mandatory Capital Increase will take precedence over equity dividend
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Recent market transactions show strong investor appetite
Every airport concession Valuations have been Limited deal flow creates Majority of transactions are
process in the last few steadily increasing since high global demand structured as upfront
years has attracted GFC in 2008 payments
significant interest Kansai/Osaka is the only
recent exception (see
case study)
Luiz Munoz Airport, Puerto Rico Nice Airport, France Ljubljana Airport, Slovenia
To ensure the process of LCS is well structured, the government needs a qualified advisory team
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To understand why the proposed pilot project for LCS has to be
SHIA, Turkey presents the most compelling reasons…
TURKEY started their ‘LCS like’ program in 2005 with its main gateway – Ataturk Airport, Istanbul
2005 From 2005 to 2015 – 8 other airport deals raised US$ 2.8 bil and 6 Seaports
Raised US$ 3.2 bil & new PPP infra investments topped US$ 16 bil
In 10 years total upfront payments and infra investments totaled US$ 22 billion
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The key lesson is that the Pilot Project must be a large enough and
prestigious enough to attract serious investors – The rest will follow…
2005 2006 2007 2008 2010 2011 2012 2013 2014 2015
2. Izmir Adnan Airport (greenfield) USD 200 Million TAV Airports (Turkey)
15. Dalaman Airport USD 90 Mio + USD 200 YDA Airport Construction and Mgmt.
Mio for expansion + (Turkey)
revenue sharing
16. Derince Seaport USD 543 Million Safi Kati Yakit (Turkey)
17. Bilkent Integrated Medical Center USD 663 Million DIA Holding (UAE)
(greenfield)
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Key Takeaways
1 back LCS implementation on a project or other sectors that can
be done sequentially so as to accelerate the process
SHIA is the most ideal asset for piloting LCS in Indonesia,
Many LCS investors for the airport sector are investors in other
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Revenue from upfront payment and annual payment can be
used to fund the construction of other infrastructures
It takes a top-down champion and strong government policies to drive forward
progress on the first LCS project in Indonesia.
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THANK YOU
Secretariat – Komite Percepatan Penyediaan Infrastruktur
Prioritas (KPPIP)
Menara Merdeka,8 Floor - Jalan Budi Kemuliaan I No. 2
th
+
• Concession Agreement will clearly define limits to pricing power (i.e. expenditure
landing fee restrictions), required capital expansions (i.e. required 3rd
runway) and hand back provisions (i.e. the required condition of the 2. Longer term benefits
asset at the end of the fixed-term) from economic
activities caused by
LCS limits “super-profits” and ensures government the infra asset
participation in future upside
• Concession Agreement to stipulate revenue sharing that will be required
from the concessionaire
…However, in LCS
• Revenue sharing provides ongoing revenue stream to government there is an additional
direct win for the
LCS allows for APII to remain as a minority shareholder government in the form
• LCS structure allows for APII to retain a passive minority stake (20-30%) of Upfront Concession
in the asset while ensuring that their local knowledge is included in airport Fees
operations
Similar scheme might be explored for other brownfield infrastructure such as seaport, telecommunication,
power plant and other transportation projects.
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Key Drivers of Airport LCS Valuations
Weighted Average
EV/EBITDA Multiples
EBITDA multiples show
relatively stable airports
operation worth over the
years
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Developed in consultation with KPPIP
Key benefits of Limited Concession Scheme (LCS) for Soekarno-
Hatta International Airport
Unlock significant upfront value and maintain ongoing revenue
stream
ü Recent transactions have shown an upfront payment range of 15 - 22x EBITDA
ü Potential upfront payment of greater than IDR 25 Trillion – 45 Trillion
ü Maintain ongoing revenue stream through revenue sharing and/or annual rent payments
All future capital improvements are no longer a burden on Government
ü Mandatory capital improvements included in concession agreement
ü Concessionaire will fund IDR 4.5 trillion for the 3rd runway and other civil works
ü Concessionaire will be responsible for terminal renovations and modernizations
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Most regional airports lack the fundamentals required for a pilot
LCS
Kualanamu showed strong revenue growth …but it is not of sufficient scope to pilot
and expense reduction in 2015… an LCS scheme
There are 3 potential structures that could be used for LCS of Soekarno-Hatta International Airport
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Option 1 - Upfront Payment Structure offers immediate funds for
other developments as well capital injection
10.0x 24,400bnRp
30 Year LCS Upfront Payment
12.0x 29,300bn Rp
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Option 2 - Ongoing Payment Structure allows for future revenue
stream
Equity Investors
Debt Providers (70-80%)
(20-30%)
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Option 3 - Upfront + Ongoing Structure – Potential for best of both
structures
Key Considerations
MoT / OBU MoF / MoSOE
ü Bidding process needs to clearly outline
minimum or fixed upfront or ongoing payments
30 Year LCS
Reduced Upfront ü Bidding process must clearly define how
Payment competing bids will be compared if having
Concessionaire + different structures
Ongoing Annual
Payment
Equity Investors
Debt Providers (70-80%)
(20-30%)
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In implementing LCS, the Government’s current approval processes
and institutional arrangements may need to be optimised
Supervisor of
Airport Authority State-owned Enterprises
Source: Ministry of Transportation Reg. No. 193/2015 and Gov’t Reg. No.
77/2012 24
Key considerations to ensure the best value for Government
Foreign Exchange Risk will be a Airlines operating at SHIA must The greater degree of
key concern for potential investors be involved in the process to operational freedom allowed to
given volatility in Indonesian ensure deal success the Concessionaire will drive a
Rupiah higher valuation
• Concessionaire will want to
• Government should consider partner with airlines to • Clear understanding of
allowing airport landing fees to develop long-term operational limitations
be indexed to USD or basket partnerships
of foreign currencies • Work together with
• Need to provide assurance government to improve
• Pegging landing fees to USD that related airline operating efficiency including customs
will allow investors to tap US costs are clearly defined and immigration
private placement market for
lower rate debt Potential Legal Restrictions
Potential Legal Restrictions MoT Reg. No. 129/2015, article
• Use of low-rate debt will 7 Airport business entities
Gov’t Reg. No. 70/2001, article 48 (Badan usaha Bandar Udara)
increase compensation to The determination to provide
government are required to provide facilities
International flight (to/from for operational services at least
abroad) should be done by 70% and commercial at most
• Long-term IDR hedging considering the tourism and 30% from the total terminal area
instruments are difficult and economic growth of the country reduced by 20% for terminal
expensive to structure circulation
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SHIA is poised for increased global profile but requires massive
capital expenditure
Economic Impact
Via Toll Road (from city center to SHIA) According to Airport Council International (ACI),
§ Jakarta Inner Ring Road (~30.2 Km) SHIA is one of the busiest airport in the
§ Prof. Sedyatmo Airport Toll (~30.5 Km) world – It was ranked 9th busiest in the
§ Jakarta Outer Ring Road (~35 Km) world ahead of Changi in 2012, but now
ranked 18th behind Changi at 16th
Providing flight services from up to 46 airlines
SHIA Express (Express Train) for domestic and international flights
Planned route: Halim Airport à Manggarai à
Dukuh Atas à Tanah Abang à Pluit à SHIA
Need for significant investment capital to
(~33.68 Km) develop a third runway (IDR 4.5 trillion) and
upgrade Terminals 1 & 2
Source: AP II Annual Report (2015), AP II Press Release (2014), Tusk Advisory Database (2014), BPS DKI
Jakarta (2015) 26
SHIA has strong fundamentals but has significant need for
operational efficiency
SHIA has shown decent revenue growth …but it still lags behind the operational
despite negative passenger growth… efficiencies of other large regional competitors
Annual Passenger Movements (in millions) Potential Private Operator Value Drivers
Private sector investment can provide needed upgrades
to allow SHIA to become a major hub airport
• Improve and add runways that can handle larger
passenger planes such as A380s
60.1
57.8 57.2 • Increase airport movement efficiencies to improve
54.3 connection abilities
51.2 • Increase proportion of international flights
Improve retail, cargo and aeronautical revenues to bring
2011 2012 2013 2014 2015 SHIA up to global standards
Source: AP II Annual Report, 2015 • SHIA revenue per passenger is $5.66 compared to
global average of $21.22 as well as regional competitors
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LCS will increase revenue per passenger of SHIA to rightful levels
54.3 million passengers 49 million passengers 69.7 million passengers 55.5 million passengers
386,615 routes 815,340 routes 410,000 routes 346,300 routes
Revenue
Aero: US$175 million Aero: US$ 460.5 million Aero: US$ 5.74 billion Aero: US$611.3 million
Non- Aero: US$141 million Non- Aero: US$252 million Non- Aero: US$ 1.04 billion Non- Aero: US$954 million
Source: Changi Annual Report (2014/15), HKIA Annual Report (2015/16), KLIA Annual Airport (2015), Centre For
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Aviation
LCS will also bring SHIA up the value chain in terms of managing
operational complexities in the modern age
…and increasing both stature and revenue for
Global operators will ensure SHIA’s growth… SHIA
In March 2016, the Japanese Government reached financial close on 44 year concession
featuring an ongoing + upfront payment structure for two airports
Deal Overview
Concession- Upfront Annual Revenue Performance
aire Payment Payment Sharing Security
JPY 175 billion
JPY31.4
Project billion
JPY 37.3 billion
3% after (US$1.49
Highlights revenues reach billion)
(US$371
(US$312 JPY150 billion
million)
million) * reduced by
JPY56 billion
after Year 5
ü Government receives ongoing fixed revenue stream
Benefits to ü Retains long-term revenue stream and participates in achieved upside
Japan ü Performance security partially mitigates downside risk in case of
concessionaire default
ü Airport serves large catchment area
Similarities
ü Operational upside from transfer from public sector to private sector
to SHIA management
ü Kansai Airport is unable to have any future expansions due to geographical
footprint
Advantages ü Osaka Airport has operating curfew and limits on aircraft movements
of SHIA ü Future high-speed rail connection to Osaka limits future upside
ü Osaka Airport only serves domestic market
ü High annual payment structure reduced competition
Structural
ü 10 teams were shortlisted but only one submitted a final offer
Dis- ü To obtain high valuation, government removed any restrictions on landing
advantages fees
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Case Study – Luis Munoz International Airport (Puerto Rico)
In February 2013, Aerostar reached financial close on a 40-year concession to operate Luis Munoz
International Airport in San Juan, Puerto Rico.
Deal Overview Private Sector Management
Led to Improved Efficiency &
Additional
Concession- Upfront
Committed
Revenue EBITDA Increased Revenue
aire Payment Sharing Multiple
Investment
Pre-Concession Post-Concession
Year 1-5:
US$2.5mil /year
Project Year 6-30:
Highlights US$170 million
US$615 5% of Gross 25.4x
(In first 5
million Revenue (not incl. future
years)
investment)
Year 31-40:
10% of Gross
Revenue
Before
Concession
At the time, it was the 3rd largest airport in the
world with over 67 million passengers
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