GMR may lose Male airport contract

Maldives Cabinet favours termination of agreement, govt sends notice firm calls move unilateral

In a major blow to Bangalore-based GMR Infra, the Maldives government has recommended termination of the contract awarded to it for upgrade of the Male airport at a cost of $530 million.

This was decided at a meeting of the country’s Cabinet today and a notice was subsequently sent to the GMR group, Maldivian President’s press secretary, Masood Imad, said in a statement.

GMR Infra said the government’s intended move to take over the possession and control of the Ibrahim Nasir International Airport, under the pretext the agreement becoming void, was unilateral and irrational. “This unlawful and premature notice on the pretext the concession agreement is ‘void’ is without any locus standi and will, therefore, be challenged by the company before competent forums,” GMR said in a statement.

AIRPORT STATISTICS
	Q2-2013	Q2-2012	Growth
Total passengers	671,000	611,000	10%
Total cargo (tonnes)	10,005	10,016	-1%
Total fuel sales (mn l)	31.12	36.96	-16%
Net revenue (Rs  cr)	304	225	35%
PAT (Rs  cr)	44	15.2	190%

The Indian government also backed GMR Infra, saying Maldives’ decision to terminate the contract without due consultations sent a “very negative” signal to foreign investors.

Ever since the contract was awarded to GMR, the project had been at the centre of a controversy over collection of $25 as airport development fees. There also were allegations from the current government that the previous ruling party had rushed through the bidding process, which was not transparent enough.

GMR Infra has a 77:23 joint venture with Malaysia Airport Holdings for this project. It was to upgrade, maintain and operate the existing airport, as well as build a new terminal by 2014.

GMR Infra’s Male story

* June 2010: GMR wins bid through 
‘pay and earn’
Total bid value: $529 mn
Upfront payment: $78 mn

* Oct 2010: Achieves financial closure 
within four months
Equity infusion: $153 mn
Debt: $358 mn

* Dec 2011: Following stiff opposition, a civil court restrains GMR from collecting $25 as airport development fee (which was to be charged from Jan 2012); GMR opts to continue to adjust loss of revenue on non-levy of ADF and insurance charge from concession fees payable

* Aug 2012: Arbitration process starts 
in a Singapore court

* Sep 2012: Suspends construction of 
new terminal 

* Nov 2012: The Maldives govt recommends termination of contract with GMR Infra

The GMR-led consortium has been maintaining that the bidding process had been overseen by IFC, a World Bank-owned institution, and the entire process was transparent. GMR had even proposed to renegotiate on ADF collection from Maldives nationals and offered various options as well.

The total cost of the modernisation and expansion project, estimated at $529 million, is being funded through a combination of debt and equity in a 70:30 ratio. The debt component of $358 million had been tied up with the Singapore branch of Axis Bank, which is acting as the sole underwriter and mandated lead arranger for the debt facility. The debt has a door-to-door tenure of 12 years, with a ballooning repayment over seven years commencing June 2015.