Saudi Arabia - Madinah Airport

 72717 Success Stories public-private partnerships This series provides an overview of successful public-private partnerships in various infrastructure sectors, where IFC was the lead advisor. IFC Advisory Services in Public-Private Partnerships 2121 Pennsylvania Ave. NW Airports Washington D.C. 20433 ifc.org/ppp Saudi Arabia: Madinah Airport Madinah, Saudi Arabia, is a major destination point for pilgrims and a designated center for knowledge-based industry in the country. The Prince Mohammed Bin Abdulaziz International Airport, which serves the Madinah region, has not been able to adequately cater to the growing numbers of passengers due to inadequate infrastructure. IFC played a key role as lead advisor in helping Saudi Arabia’s General Authority of Civil Aviation (GACA) attract a reliable investor to expand, modernize and operate the airport. The project fulfilled the twin objectives of introducing private sector expertise and developing a significant, stable revenue stream for the government. TIBAH, a consortium of firms from Turkey and Saudi Arabia, won the 25-year conces- sion to develop and operate the entire airport. It will invest over $1.4 billion to build a new terminal and expand facilities to accommodate up to eight million passengers per annum (MPPA) by 2015, with additional investment to increase this capacity to 18 MPPA by the end of the concession. The modernized airport will employ best practices in energy-efficient and environmentally-friendly design. The transaction was awarded and signed in October 2011. BACKGROUND The project was designed in two phases, and included a new, state- Madinah, the second most holy city in Islam, is the fourth-largest city in of-the art passenger terminal; upgrading and extension of an existing Saudi Arabia and a major destination for pilgrims. In recent years, it has runway; equipping runways with a new lighting system; and an upgrade also seen large capital inflows as a result of government efforts to attract of all taxiway infrastructure. The airport will be able to manage eight investment and generate jobs in knowledge-based industries. million passengers by 2015, and after further expansions, 18 million by 2037. The new operator will manage the airport, including all airside The Prince Mohammed Bin Abdulaziz International Airport, which and landside operations. GACA will perform its role as regulator, and received international status in 2007, has seen major growth in demand continue to be responsible for key activities such as air traffic control. and is approaching its maximum capacity of five million passengers per year. Existing facilities are strained and cannot accommodate IFC also drafted the concession agreement so that risks would be further growth; requests by airlines for landing slots are already being allocated appropriately to the partner best equipped to deal with denied because of a lack of capacity. Short-term expansion works have them. For example, the winning bidder will assume construction and been undertaken to provide temporary relief in an attempt to alleviate operational risks, while GACA will play a role as facilitator in any congestion. interactions with public stakeholders. With demand expected to double by 2020, Saudi Arabia’s General Key selection criteria included meeting or exceeding minimum technical Authority of Civil Aviation (GACA) launched an ambitious plan to and operational requirements, financial commitment, adherence to best modernize and expand the airport with private sector participation under practices in energy and environmental practices, and modern design that a long-term concession. This approach is part of GACA’s overall strategy reflects Madinah’s historic and religious importance. of reforming and modernizing Saudi Arabia’s aviation industry. BIDDING IFC’S ROLE Interest in the project was strong. Ten international, regional and local GACA took on IFC as lead transaction advisor in April 2009. GACA’s firms submitted qualification applications. Four consortia ultimately key objectives were to: submitted bids. Technical bids were evaluated and scored before opening financial bids. • Upgrade airport infrastructure to meet forecasted traffic growth and provide efficient, high-quality service to airlines and passengers; After determining a final score, TIBAH was awarded the concession. The winning consortium consists of TAV Holdings of Turkey, Al Rajhi • Promote Madinah as an entry/exit hub for pilgrim passengers to Holding Group and Saudi Oger, both from Saudi Arabia. complement the role played by the international airport in Jeddah; The agreement was signed on October 29, 2011. IFC’s involvement • Implement international best practices in operations and service; will continue until the financial close of the project. • Generate employment and economic activity in the surrounding area; and • Avoid public financing of capital and operating costs by adopting POST-TENDER RESULTS a PPP structure to generate a revenue stream for government. • Enables the airport to meet strong growth in passengers — up to eight million capacity by 2015 IFC, aided by technical and legal consultants, conducted detailed due diligence taking into account expected traffic growth, local legislation, and 18 million by 2037, mainly catering to pilgrims design requirements, financing impact, and cultural considerations. from developing countries. The team determined the minimum technical requirements, design • Mobilized $1.4 billion in private investment. specifications, and recommended a transaction structure that best • Provides a precedent-setting high gross revenue achieves GACA’s goals and meets market expectations. share (54.5 percent), which will generate an estimated IFC also marketed the project to international bidders, who were $7 billion of revenues to GACA during the concession. invited to raise and clarify issues during the pre-qualification and • Introduces global best practices in energy efficiency, bidding process. IFC used this input to tailor bidding documents recycling, greenhouse gas emissions, and water use; to the needs of potential investors, thereby increasing the attractive- LEED Silver Certification targeted, which would be ness and bankability of the project. IFC also managed the bidding a first in the region. process, supervised the drafting of transaction documents, and will • Provides direct employment through construction continue im speto advise GACA through financial close. and airport operations, and indirect employment through increases in tourism and the development TRANSACTION STRUCTURE of knowledge-based industries in the area. IFC recommended a build-transfer-operate (BTO) structure in a 25-year concession. This structure would keep ownership of assets in government hands, as required by GACA, while ensuring that private sector partners would contribute funding and expertise for a world-class international airport. 1/2012