62440 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/infrastructureadvisory Maldives: Malé International Airport In June 2010, IFC advised the government of Maldives on the country’s �rst successful public-private partnership project: the structuring and awarding of a 25-year concession for Malé International Airport. The transaction is a flagship deal for the privatization program of the new democratically elected government and is already being used as a model for launching a full-scale public-private partnership program. The concession was awarded to a consortium of GMR Infrastructure Limited (GMR, India) and Malaysia Airports Holdings Berhad (MAHB, Malaysia). The consortium will pay $78 million in upfront fees and offered a percentage of shared revenues that represents over $1 billion in �scal bene�ts for the government over the length of the concession, calculated on a net present value (NPV) basis. The proposed investment of $400 million represents nearly 40 percent of the country’s gross domestic product (GDP). The advisory work was supported by AusAid (Australia), the Ministry of Foreign Affairs of the Netherlands, and DevCo. DevCo is a multi-donor program af�liated with the Private Infrastructure Development Group and funded by the UK’s Department for International Development, the Ministry of Foreign Affairs of the Netherlands, the Swedish International Development Agency, and the Austrian Development Agency. BACKGROUND The cornerstone of the project was the construction of a new passenger Malé International Airport opened for operations in November 1981, terminal expected to meet LEED silver criteria and to be carbon- replacing a runway that had been built on a strip of cleared land in neutral—i.e., to minimize energy consumption and carbon emissions the middle of Hulhulé Island, about 2.8 km from the capital city through the use of energy-efficiency and renewable-energy technologies, of Malé. Since then, nearly 80 percent of air traffic to the Maldives and minimize water consumption. The bidders were also asked to passes through the airport, which provides scheduled services to make specific, predefined improvements to the existing airport outlying islands. The airport has a unique intermodal transport infrastructure, and to manage all core airport services, including system that allows passengers to connect between international and the provision of fuel—a historically established role at Malé airport. domestic flights—including seaplanes that provide connections with island resorts scattered throughout the Maldivian archipelago—as BIDDING well as motor boats. Six bidders were prequalified for the transaction, comprising more The growth of the airport was constrained due to the lack of available than ten international investors. Three bids were ultimately received. land and financing to increase the capacity of the terminal capacity Financial bids were evaluated based on the payment of an upfront fee as well as to ensure compliance with international safety standards, as well as annual concession fees as a percentage of gross revenues to and by the limited access to international best management practices. the government. The bidder with the highest financial bid evaluated Consequently, the government sought a private sector partner that on an NPV basis would be awarded the concession. would help it expand and rehabilitate the airport. This decision was The GMR-MAHB consortium won the bid by offering upfront fees part of a broader strategy to liberalize air transport policies, improve of $78 million and a concession fee averaging more than $1 billion in the competitiveness of Maldives’ airports, and provide the necessary fiscal resources (on an NPV basis) over the lifetime of the concession. boost to the economy, 80 percent of which is dependent on tourism. IFC’S ROLE The government appointed IFC as its lead adviser to structure and POST-TENDER RESULTS implement a balanced transaction. Key objectives were to: The government received a considerable upfront fee for increase the airport’s capacity to handle long-term traffic the concession contract. growth while ensuring that the airport met international tech- The project is expected to generate over $400 million in nical standards; foreign investment and lead to the creation of thou- position the airport as a world-class facility catering to high- sands of jobs. end tourism; The new Malé airport will be compliant with interna- improve operations and service quality standards in line with tional norms, and the facilities will be environment- international best practices; friendly. maximize the value of the project for the government in terms A better functioning airport will help support the de- of proceeds and quality; velopment of the country’s tourism industry and lead to implement a successful public-private partnership which could economic growth. serve as model for other infrastructure projects. TRANSACTION STRUCTURE The government’s prior attempts to privatize the publicly owned airport company (Maldives Airport Company Limited, which also operated the Malé airport) had been unsuccessful, so IFC organized an international bidding process in a way that would ensure the selection of a reputable consortium capable of delivering such a project. Each bidder was required to demonstrate that it had the requisite experience in developing, designing, constructing, operating, and financing airports of a similar size. The technical solutions proposed by the bidders were also expected to consider the specific conditions on Hulhulé Island, including its physical and environmental constraints, and the coordination required between conventional aviation activities, seaplanes, and motor boats. 10/2010