Acsa flies into a storm over Indian deal

A CONSORTIUM led by the Airports Company SA (Acsa) and services company Bidvest confirmed yesterday that it would spend R9bn to upgrade and run India’s Mumbai airport, despite a looming storm over the deal from within India.

While Transport Minister Jeff Radebe yesterday hailed Acsa’s first overseas venture as a “new era” for the company, court action and opposition from Indian labour unions mean the foray into Indian airports will be far from an easy ride.

The South African companies, which formed a consortium with India’s GVK Industries, came up trumps over nine other bidders by offering to give the Indian government 38% of the revenue they will earn from operating and running the Mumbai airport.

At the same time, a consortium of Germany’s Fraport and Indian company GMR has won the concession to manage the Delhi airport.

Both concessions are for 30 years, with an option to extend for another 30 years.

During that period Acsa will own 10% of the Mumbai airport, Bidvest 27% and GVK 37%, while the Indian government will hold the remaining 26%.

Old Mutual Asset Managers, which was originally set to join the consortium, is no longer involved in the deal.

But while Radebe, Bidvest CEO Brian Joffe and Acsa CEO Monhla Hlahla were discussing their Indian foray with the media in Sandton yesterday, a crucial court hearing kicked off at the Delhi high court.

The court heard argument from an Indian development company, Reliance Airport Developers, over both the South African and Fraport concessions.

Reliance wants the court to set aside the government’s decision to award the two concessions.

Reliance was quoted in the Indian press as saying that it was “untenable” that the Indian government made “substantial changes to the published tender conditions, (changes that were) telephonically communicated in strange circumstances two hours before (the) opening of bids”.

Besides the court action, India’s trade unions recently urged the bulk of the country’s 21000 airport workers to support a strike against the privatisation of the airports this month.

The four-day strike was halted only when Prime Minister Manmohan Singh told the unions that workers would not lose their jobs in the privatisation move.

Yesterday, Radebe also moved to reassure Indian workers that their rights would not be trampled in the involvement of the South African consortium, following concerns expressed in the Indian media.

“I want to assure all concerned that we will not disregard or seek to bypass either established labour relations systems in India or engage in activities that undermine legitimate rights of workers,” Radebe said.

Hlahla said the consortium would likely raise the R9bn in India, but she would not reveal further details until discussions had “reached a financial close”.

Although Acsa and Bidvest were tight-lipped over when the consortium expected to make a profit on their initial investment, Joffe said “we are optimistic about the financial benefits that will accrue to us as a company”.

But Acsa is also preparing to spend R5,2bn to upgrade its 10 South African airports in preparation for the 2010 Soccer World Cup, to be held in this country.

This will include issuing a R2bn bond this year, and funding the remainder from cash flows.

Although Acsa’s debt levels are currently low, the Indian debt along with the R2bn bond will ratchet up its liabilities, which may make it difficult for the parastatal to expand aggressively elsewhere.

Acsa confirmed yesterday that it was looking to “bid in Nigeria for the Abuja (airport concession)” and was also looking at buying into airports in both east and west Africa.

Source: Business Day - www.businessday.co.za

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