A joint venture of GMR Infrastructure Ltd. and Megawide Construction Corporation of Philippines that will construct, develop, renovate, expand and operate the Mactan Cebu international airport in the Philippines has achieved financial closure for the project.
Announcing the financial closure on Monday, GMR Infrastructure said the “financing will fund 70 per cent of the total project cost of PHP 33 billion (about $750 million).’’ The loan is being financed by a consortium of six banks.
It is a 25-year concession agreement that GMR-Megawide Cebu Airport Corporation (GMCAC), the joint venture firm, has signed, and the airport in Mactan Cebu is the first in the Philippines to be privatised under the administration’s ambitious PPP (public private partnership) aimed at modernising key infrastructure assets. GMR has 40 per cent equity, while Megawide Construction Corporation holds the rest.
The total equity contribution of GMR to the joint venture firm is around $90 million, of which the group has already invested $48 million and “do not envisage any further investment in the near future.” The GMR-Megawide Consortium emerged as the highest bidder with a bid premium of PHP 14.4 billion (about $305 million) and the project was awarded in April, a release from the GMR group said.
GMR Infrastructure Chairman G. M. Rao said the financial closure signified the confidence of the banks in the abilities of the joint venture partners. For, the GMR Cebu airport project is an ‘excellent addition’ to the group’s portfolio with “cash inflows from day one and is expected to make profits from the first year itself.”
Referring to the huge untapped growth potential that exists, the release said the “under-developed commercial business and a decisive, stable regulatory regime provide an opportunity to convert the traffic potential into bottom line growth.”
GMCAC will construct a new terminal building within three years. The immediate priority, however, will be to upgrade the existing terminal and enhance operating systems and processes. The joint venture plans to develop the airport into a regional hub in the Philippines, the release said.