GMR commercially secured Male Airport contract, but failed to understand politics behind it

New Delhi, Dec 4 (ANI): India-based GMR Infrastructure has claimed that met all commercial criteria required by the Maldives Government to secure the USD 511 million Male International Airport contract, as per documents obtained from sources.

But what now seems apparent is that the firm failed to read the "politics" involved in the Maldivian Government's decision to reject the bid, and push the matter to a Singapore court for final arbitration.

The latest development relating to the stand-off between the two disputing parties, and to an extent the Indian Government's role in it, is that GMR Infrastructure maintains that it had not invested in the Maldives "to be compensated", but would not hesitate to take all "legal remedies" to protect its airport contract in the island nation.

"It's not a question of compensation. We did not come here for compensation. We came here because we competed competitively in an international tender and we won that bid," the CEO of GMR Male International Airport Andrew Harrison, was quoted, as saying by a news agency late on Monday night.

Harrison maintained that the Maldives Government, which had given a sovereign guarantee, did not follow the terms of the agreement, which has laid down a proper procedure to be followed even in the case of terminating the contract.

When asked whether GMR Infrastructure would move to the International Court of Justice in case of a forceful take over of the Male airport by the Maldivian Government, he said: "We will follow every single legal remedy that is available to us. We will ensure that our rights are protected. There are international laws that has to be followed by the countries."

Meanwhile, the Maldives Government is standing firm by its decision to take control of Male International Airport by December 8, inspite of sources saying that India is upset with the development, and has reportedly decided to freeze an aid of USD 25 million due to the Maldives in 2013.

Television channels are reporting that Maldivian Foreign Minister Abdulla Jihad called up his Indian counterpart Salman Khurshid r on Tuesday to say that Male would be sending a detailed communication on why they had to scrap the GMR deal.

The Maldives claims the deal was too expensive for them to adhere to and is insisting that GMR Infrastructure hand over operations to the Maldivian Airport company.

The ultimatum comes despite a Singapore court's stay on the cancellation of GMR's licence to operate the airport.

Khurshid said: "I think politically it is important that Maldives handles this matter with sincerety, handles with transparency and handles it keeping in mind the value of our relationship. Maldives has been an important partner for us, we would want it to remain an important partner. But in a partnership, there are responsibilities. We have a right to expect that those responsibilities will be fulfilled."

According to a report provided by sources, the process for privatising jointly developing Male International Airport started on August 25, 2010.

The bid documents and other related papers were checked, revised and relevant persons in the Public Enterprises Monitoring and Evaluation Board ((PEMEB) of the Ministry of Finance were interviewed.

The announcement for developing the airport was first made by Investment Maldives in December 2008.

Investment Maldives then sought a party to operate Male International Airport, but failed to garner any attention from the public.

Thereafter, a financial advisory agreement seeking professional advice on airport privatization was signed with the International Finance Corporation on July 28, 2010.

As per this agreement, the purpose was to seek a partner to buy 49 percent of shares of MACL or a party to develop the airport together with MACL under private-public partnership for the GoM for a decided period, under a competitive bidding process.

The decision to handover the operations were made after the Request For Qualification (RFQ) stage.

In return, the Government of Maldives (GoM) was required to pay USD 15,000 to IFC on the day of signing the agreement. The USD 15,000 was to be paid from the moment IFC starts work and USD 20,000 was to be paid upon submission of transaction structure report.

Further, another USD 15,000 was required if IFC's service period exceeded 12 months. Once the project was awarded, the bid winner too was required to pay IFC the higher amount between one percent of the project and USD 750,000.

The bid documents and other necessary information under this agreement were prepared by IFC.

According to sources who provided this report, the following chart outlines the progress of the bid process.

1. IFC agreement 28/7/09

2. Transaction Structure Report

3. Announcement 6/10/09

4. EOI acceptance

5. Sending RFQ 23/12/09

6. Pre-qualification Application acceptance 17/1/10

7. Pre-qualification evaluation 20/1/10

8. Sending of RFP/IM 18/3/10

9. Bid opening 20/6/10

10. Bid Evaluation 24/6/10

11. Signing the agreement 28/6/10

Annexure Two of the report reveals that the Maldives Government was advised that at least USD 377 million was required to upgrade the airport to meet international standards. It was also informed that an airport development charge needed to be applied, and that there were two ways of buying investment for the airport. One, by selling the shares and the other by agreeing to ink a concession agreement.

It was estimated at that time that if 51 percent of MACL's shares were to be sold, the GoM would receive a revenue of USD 203.9 million as dividend and a service charge.

According to the then presentation, if a concession agreement was made, the occupier must pay an occupancy fee and an estimated five percent of their income to the government. The net present value of the GoM's expected revenue under this concession was estimated to be USD 243.6 million.

Annexure three of the document, which deals with the Expression of Interest (EOI) Phase, reveals that the Maldives Finance and Treasury had announced on October 6, 2009 that it was seeking interested parties to buy MACL shares.

In this announcement, the GoM had said that they would leave control of the airports company and restructure the building and agree for a more flexible investment plan. The shortlisting criteria of parties submitting EOI, was said to be experience of serving more than three million passengers a year, and financing and operating the airport.

It was a also mentioned, in relation to the initial announcement that, a party could form a consortium with another party in order to achieve the mentioned criteria. It was also mentioned that after the asseement, the shortlisted candidates would be sent a Request for Qualification (RFQ) in December 2009 and a Request for Proposal would be sent afterwards. Once the confidentiality agreement is signed and sent along with EOI, the party would get the opportunity to visit the venue and seek more information. The announcement, however, does not specify a deadline for submission of EOI.

Parties that submitted the EOI and their dates of submission included: Tepe Afken Airpoerts TAV (21/10/2009); GMR infrastructure Limited (30/10/2009); Aeroports de Paris Management (ADPM0 (30/11/2009); Reliance Airport Developers Private Limited (30/11/2009); Larsen and Turbo Limited - Chennai 5/12/2009; Egis Projects, Aeroports de la Cote d'Azur and Mauritius Commercial Bank (MCB) Capital Partners (9/12/2009) and SNC-Lavalian Inc/ Vienna International Beteiligungs Management GMHB on behalf of Fulghafen Wein AG (Vienna International Airport VIE (19/12/2009).

Sources reveal that there was no official attempt for registration of all the E.O.I applicants for this projected.

An information memorandum inclusive of the request for proposal and information regarding the project was sent on 18th March 2010 to all six prequalified parties.

The RFP provides complete details regarding the content that is necessary to be included in every bid and the documents that should be presented with the bid. They included:

Bid Form:- According to the sample on Schedule 4, Form 1

Bid Security:- According to the sample on Schedule 4, Form 2

Confirmation of Status:- According to the sample on Schedule 4, Form 3

Corporate Structure:- A report describing the corporate structure of the party proposing the bid

Power of Attorney:- According to the sample on Schedule 4, Form 4

Report concerning Conflict Of Interest:- According to the sample on Schedule 4, Form 5

Initially proposed draft Concession Agreement:-According to Schedule 2

The specifics of the technical bid included: The strategic plan for development:- long term vision, means for raising capital for development, estimated traffic, strategy for expanding market and profitability, estimated profits and expenditure, process for handling operation, Construction plan:- fulfillments to be met according to civil aviation regulations, terminal building, airfield pavement, land acclamation, supporting services, landside development and Main plans for management:- safety plan, environmental plan, operational plan.

The financial bid included:

- The amount payable for the initial concession fee before the bid it is handed over

The amount of USD 1.5 million payable as the annual concession fee (the amount stated on the form)

The percentage payable to the government from profits excluding those obtained from the sale of oil starting from the date of occupancy up till 2014

The percentage payable to the government from profits excluding those obtained from the sale of oil starting from 2014 to the end of the contract

The percentage payable to the government from profits obtained solely from the sale of oil starting from the date of occupancy up till 2014

The percentage payable to the government from profits obtained solely from the sale of oil starting from 2014 to the end of the contract

The bid data sheet included with the RFP states that the last date for proposing the bid is at 17:00 of 13 June 2010. Also that the bid must be presented with a bid security of USD 750, 000, that is with the original document and three copies.

The memorandum that was set sent with the RFP (Annex 8) describes in detail the operation of the airport, the current situation, financial information and the legal information.

In 2009,, an Aerodome audit was carried in which 53 points to be addressed were noted including points such as the runway not being wide enough and the safety zone at the end of the runway (R.E.S.A) failing to have adequate space.

Amendments for the faults as dictated above were included in the minimum technical requirements (M.T.R) for the development of the airport. As such the main clauses included are as follows:

Demolition of the buildings towards the South of the Runway that are identified as obstacles in the in the blueprints

Relocating the terminal to the East side: A terminal must 45000 square meters in size, must have 11 Code C Stands and 6 Code E Stands out of which 4 Code E Stands and 1 Code C Stand must have an air bridge and also the building should be viable for at least 50 years of usage.

A V.I.P/C.I.P Terminal Building that has 42 000 square meters in floor size with one Code C and one Code E stand, must be constructed

Laying of a fiber optical network for airport usage

Airport's ICT system: Information system, baggage system, check-in system, placing information kiosk's

Changing the location of the M.N.D.F building

Apron: Be able to use for 25 years, meet the requirements of the ICAO, change the drainage systems to meet the safety requirements, have the necessary power generation and communication infrastructure.

Have a taxi-way leading to the new apron: Being able to enter the new apron without having to go the end of the existing runway and be able to use for another 20 years. Have the necessary power generation and communication infrastructure.

Repairing the runway: Before the 2015, repair and upgrade to the necessary standards, the 7600 square meter area indicated in the Dian Test report. The repaired area should be able to use for another 20 years. The drainage system should meet the necessary standards and should be able to use for 50 years.

Road construction: Construct a road that leads from the East to the West of the runway. This road (which estimated as to be 21000 square kilometers) should be able to use for 20 years.

Land reclamation.

Make a new base for the ground handling.

Make a storage facility to keep the aircraft spare parts.

Relocating the existing fuel pump.

Relocate the fire station, construct a new building and develop the roads leading to the new fire station

Build a harbor and develop the jetty

As per the security requirements, place fences around the airport and build a security system.

The detail of the airport's revenue and the traffic and included in the I.M.

The bid evaluating committee comprises of:

1. Ali Shiyam: Economic Advisor of the President's Office

2. Ahmed Nizam: Maldivian Air Taxi

3. Ahmed Mahreen: Regional Airport department

4. Ali Arif: Minister of Finance and Treasury

5. Abdulla Mohamed: Civil Aviation Department

In addition, the following took part as observers and technical advisors.

1. Mohamed Ibrahim: Managing Director of Maldives Airports Company Ltd

2. Hussain Siraj: Board Director Maldives Airports Company Ltd

3. Ms. Ramatou Magagee: IFC

4. Ms. Neha Mehra: IFC

5. Mr. John D. Crothaz: Gde Loyrette Nouel

6. Mr. Fabian Lenteri Masa: Gide Loyrette Nouel

7. Mr. William R. Milington: Halcrow Group

8. Mr. Christopher Penn: Halcrow Group

Of the six parties that bid for the project, three were asked to present legal bids: GMR Consortium; Unique Consortium and T.A.V Consortium.

All three bids presented had passed the technical evaluation and gone to the financial evaluation.

The evaluation committee first looked at the GMR bid for the technical bid evaluation on 21st June 2010.

Since all three bids had passed the technical evaluation, the financial evaluations were done next. The evaluation was done by referring to the net present value of the concession fee that is paid to the government according to the R.F.P's financial form.

The agreement with the winning party, GMR was signed on 28th June 2010. It included:

Leasing duration of the Airport is 25 years.

Air Traffic control and navigation services will be given by Maldives Airport Company Pvt Ltd.

Permitted to use all assets in Airport to gain economic profit.

Airport services must meet level C of IATA services.

The occupier does not have to take any responsibilities of the liabilities of Airports Company Pvt Ltd.

Reports must be submitted with fees payable in every four months.

Current Employees can be terminated only after 2 years from the day of signing the agreement.

Sea Planes will be operated by the current service providers.

Fees can be charged according to the following.

Fees charged by government

? Passenger service charge

? Air traffic fee

Fees charged by occupier.

? U SD 25.00 from every passenger from per passenger as Airport Development Charge.

? USD 2.00 per passenger as Insurance charge

? Landing fee

? Parking fee

? Ground handling charges

? Aero Bridge Fee ( USD 100.00 per usage)

? Fuel charges

? Commercial revenue

? Rent from leasing of property

? Seaplane landing fees and other aeronautical fees.

In addition to these, all the aeronautical fees will be adjusted to inflation based on US consumer price index every three years. (ANI)