Limak-Led Group Bids 22.1 Billion Euros to Run Istanbul Hub
A group of Turkish builders led by Limak Holding AS won the bid to operate Istanbul’s new airport for 25 years, beating three other parties with its 22.13 billion-euro ($29 billion) offer, as Turkey aspires to create an aviation hub to rival booming operations in the Middle East.
The consortium, which also includes Cengiz Insaat, Kalyon Insaat, Mapa Insaat and Kolin Insaat, will start paying the annual rental fee from the end of 2018, when operations begin at the hub with eventual capacity of 150 million passengers. Including tax, the fee will rise to 30 billion euros, Transport Minister Binali Yildirim said after the auction in Ankara.
Turkey’s government decided to build a third airport in the city of 15 million people to help accommodate booming air travel. The current Istanbul airport posted the biggest jump in passenger numbers among the world’s major hubs last year, expanding almost one-third faster than the next-best performer as it captures traffic from Europe rivals.
“This is the biggest project in the history of Turkey,” said Yildirim. “This project will bring in about 90 billion liras to the government in tax and fees, almost equal to the government’s investment budget allocation in 10 years.”
The winning group will invest about 10.3 billion euros to build the airport in addition to rental fees, Nihat Ozdemir, chairman of Limak Holding, said after the auction. That’s up from a previous investment estimates of 7 billion euros and 9 billion euros. The new airport will start operations on the European side of Istanbul, Funda Ocak, deputy general manager of the state airports authority, or DHMI, said in Ankara.
“When we prepared for the auction, we worked on the model and sources of financing,” said Ozdemir. “There is no problem in the financing.”
The main Ataturk hub is coming closer to reaching its limits, after it served 45 million passengers in 2012 against its capacity of 60 million. The airfield cannot expand on its current footprint because of land limitations.
Ataturk airport is operated by TAV Havalimanlari Holding AS (TAVHL), Turkey’s biggest airport operator that is part owned by Aeroports de Paris. London Heathrow remains Europe’s busiest hub, with 69.9 million passengers last year. TAV withdrew from the bidding, before the group of IC Ictas and Fraport AG (FRA) of Germany lost the final round to the victorious Turkish partnership. Makyol, a Turkish builder, was the first to pull out of the auction with its 4 billion euro bid.
“This offer reasonably exhausted all of our possibilities,” Fraport spokesman Robert Payne said after the auction. “Unfortunately, we did not win the concession.”
TAV fell as much as 7.8 percent to 11.8 liras in Istanbul, the most since August 2011. Fraport declined as much as 1.1 euros, or 2.4 percent, to 44.81 euros in Frankfurt. The outcome is the second time within 5 months that Fraport suffered a setback abroad, after being outbid by Vinci SA (DG) for state-owned airport operator ANA-Aeroportos de Portugal SA in December.
Limak is partner to a joint venture operating Istanbul’s second airport, Sabiha Gokcen on the Asian side. The venture is owned by GMR Infrastructure Ltd. (GMRI), Limak and Malaysia Airports Holding Bhd. (MAHB)
The government will offer initial guarantees of a minimum 342 million passengers over 12 years to the operator of the airport, Yildirim said. This guarantee is valued at 6.3 billion euros, he said.
The builders will start construction within a year with 20 percent of the financing coming from equity, according to the tender terms, Ozdemir said. The remainder will be borrowed from international banks, he said. Any borrowings will not be guaranteed by the Turkish Treasury, Yildirim said.