u-tapao international airport public-private partnership u... · u-tapao airport commenced...

U-Tapao International Airport Public-Private Partnership

Market Sounding

Royal Thai Navy

15 June 2018

"เอกสารนาํเสนอทั้งหมด จดัทาํขึ้นเพื่อการรับฟังความคิดเห็นจากภาคเอกชน เนื้อหาทั้งหมดยงัอยูใ่นระหวา่งการศึกษา อาจมีการเปลี่ยนแปลง หา้มนาํไปอา้งอิงThis presentation was prepared for market sounding purpose only. All contents are under preliminary study process and subject to change. It shall not be used

for any other purposes."

2© 2018 KPMG Services Pte. Ltd. (Registration No: 200003956G), a Singapore incorporated company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. This proposal is subject to the satisfactory completion of our customary evaluation of prospectiveclients and engagements, and the negotiation, agreement, and signing of a specific engagement letter or contract. All rights reserved.

Document Classification: KPMG Confidential

Contents

Topics

Project Background

PPP – Commercial Overview

Project Risk Allocation

Project Agency Status

Project Timeline



1. Project Background





Overview of EEC Projects

U-Tapao International Airport is one of five priority infrastructure projects under the EEC scheme:

1. U-Tapao Airport Development

2. High-Speed Rail Linking 3 Airports

3. Laem Chabang Port Development, Phase 3

4. Map Ta Phut Industrial Port Development, Phase 3

5. Double-Track Railway Linking 3 Ports U-Tapao International Airport expansion required to serve projected

traffic and enhance competitiveness/connectivity of the EEC

"เอกสารนําเสนอทั้งหมด จัดทาํขึน้เพื่อการรับฟังความคดิเห็นจากภาคเอกชน เนื้อหาทั้งหมดยงัอยู่ในระหว่างการศึกษา อาจมีการเปลีย่นแปลง ห้ามนําไปอ้างองิThis presentation was prepared for market sounding purpose only. All contents are

under preliminary study process and subject to change. It shall not be used for any

other purposes."



Overview of the U-Tapao International Airport – Current State

Historical timeline of U-Tapao Airport

Year 1965Council of Ministers approved construction of U-Tapao Airport by RTN and the Government of USA.

Aug 1966Construction completed

Year 1979U-Tapao Airport commenced operations as an international airport. Feb 1989RTN and Ministry of Transportation and Communications joint operations of the AirportJune 2015Constructed new terminals, facilities, aprons with current capacity of 3.7 MPPA. Jointly managed by RTN and Deptof Aviation as a joint-use military/civilian airport.



other purposes."



Overcapacity at Suvarnabhumi (BKK) and DMK

— Operating above capacity since 2010.

— Currently overcapacity of 60 MPPA in excess of capacity of 45 MPPA.

— Expansion plans to increase the airport capacity to a target of 90 MPPA.

— Operating in excess of capacity since 2015.

— Operating at an overcapacity of 37 MPPA vs. capacity of 30 MPPA.

— International passenger traffic growing at 35% a year due to displaced traffic from BKK.

— Capacity expansion limited due to site constraints.



other purposes."



U-Tapao International Airport PPP Project will incorporate the development and operation of the following assets across over the 6,500 rai of development area:

U-Tapao International Airport – PPP Project Scope

PPP Project Scope

Airside Facilities5

— Apron

— Air traffic control tower

— Other airside ancillary facilities

Airside Operating Assets4

— Cargo Terminals

Cargo Village/ Free Zone 3Passenger Terminal 1

Commercial Gateway2

— Hotel

— Office

— Retail

— MICE

— Car Parking



other purposes."

2. PPP – Commercial Overview





Introduction to PPP Concept

Defin it ion

PPP is def ined as a long-term contractual

arrangement between the Publ ic Sector and the

Pr ivate Sector whereby the Pr ivate Sector provides

a serv ice through the f inancing, development and

long-term operat ions of a publ ic infrastructure

PPPs are characterised by:Development of a public infrastructure financed by the private sectorProvision of public services using the infrastructure developed by the private sectorLong term contract with the private sector responsible for maintaining and operating the infrastructure Key project risks are allocated to the private sector Performance standards set out in the governing PPP Contract



other purposes."



PPP – EEC Context

EEC Act B.E. 2561

• Enacted on 15 May 2018

• Governs projects in the EEC

• Provides certain privileges to businesses operating within Special Economic

Promotion Zone

• Provisions to facilitate and promote investments within

the Special Economic Promotion Zone

EEC Fast Track

• Applicable to projects selected as highly important as determined by the EEC

Policy Committee

• Expedite overall project approval processes

• Reduces timeline for projects from preparation

through to partner selection to 8-10 months



other purposes."



Why PPP?

Benefits

— Leverage private sector investment to provide upfront financing for the Airport and associated developments

— Access private sector’s expertise and innovation to develop a world class aero city

— Value for money proposition by private sector party assuming key project risks

— Economic activities over the development phase and over the operating phase of the Project by:

- Creating employment opportunities

- Enhancing connectivity and travel efficiencies

- Increase in-bound tourism domestic/international to the region

- Encourage new industries and investment sectors



other purposes."



U-Tapao PPP Project – Governing Principles

Principles

— Risks are to be allocated on a fair and balanced basis between the private sector and the Government. Identified project risks to be allocated to the party best able to manage or mitigate that particular risk.

— Adopted payment mechanism should ensure that the private sector is able to achieve an acceptable rate of return on its investment given the level of risk assumed in undertaking the Project.

— PPP Contract should provide the right level of flexibility to ensure that the private sector can innovate to ensure the best outcomes in terms of design, construction and operations.

— PPP model must meet the broader policy objectives for the development of the EEC region.



other purposes."



U-Tapao PPP - Contracting Model

The U-Tapao Airport PPP will be structured as a “Net Cost” PPP Contract

— Design and development of the required Airport Infrastructure

— Financing the development of each of the project components

— Operations and maintenance over the concession term

In return, the private sector party will have the right to generate revenue through operating the airport and the project components over the concession term

Aeronautical revenues

Non-aeronautical revenues

PPP Co.

Share upside via revenue share, upfront concession fee or lease payments

Support in the form of:— Capital assets such runway, taxi-way,

remote parking and ancillary Infrastructure (utilities)

Public Sector



other purposes."



PPP Contracting Structure

Government will contract with one single party (PPP Co)

Qualifications: Airport Developer/Operator, Commercial /Industrial Precinct Developer

PPP Contract governs relationship between the public sector and PPP Co:

— Obligations of the parties and allocation of responsibilities

— Incorporate technical requirements regarding capital and operational matters (including joint-use arrangement)

— Define service level requirements

— Sets out the basis of revenue generation

Public sector

PPP Co.

PPP Contract

Land lease agreement

Sponsor

Lenders

Govt(e.g. Treasury)

Construction Contractor

O&M Contractor

Repair & Maintenance,

Facilities Management

Airport Operations

Soft services (catering,

cleaning etc)/ Retail &

Commercial

Equity

Financing agreement

O&M Contract

EPC Contract

RTNJoint Use Agreement

*Under preliminary study process to maximize benefits for commercial and military use.

To be confirmed after feedback from investors are consolidated.



other purposes."

3. Risk Allocation





Key Project Risks (1/2)

Proposed Risk Allocation

Risk Description Public Private

Land and land useapproval

Risk of acquiring title to the project site used and the selection of site; including risk of necessary planning permission and access rights (i.e. acquiring the land on time and at cost)

Environmental and social risks

Risk of damage and hazard during construction to the environment, site conditions, or local communities.

Construction risk Risk includes labour disputes, construction project management, quality assurance standards, defects, subcontractor performance and disputes, or cost overrun scenarios.

Performance risk Risk that the project is unable to achieve the output specification metrics, such as inability to expand, premature obsolescence of equipment, and inability to meet asset handback requirements.

Demand risk Risk that the air traffic demand does not materialise and is lower than forecasted.

Non-aeronautical revenues

Risk that the PPP Co is unable to achieve non-aeronautical revenues as expected.



other purposes."



Proposed Risk Allocation

Risk Description Public Private

Regulatory / change in law risk – General

Changes in general law affecting the ability of the Project to perform.

Regulatory / change in law risk – Project-specific

These would include changes in project-specific laws impacting airport operations, or project specific tariffs and charges (aeronautical revenue caps).

Force majeure risk The risk that unexpected events (eg. floods, earthquakes) occur that are beyond the control of the parties and results in delays or prohibit performance of PPP Co.

Key Project Risks (2/2)"เอกสารนําเสนอทั้งหมด จัดทาํขึน้เพื่อการรับฟังความคดิเห็นจากภาคเอกชน เนื้อหาทั้งหมดยงัอยู่ในระหว่างการศึกษา อาจมีการเปลีย่นแปลง ห้ามนําไปอ้างองิThis presentation was prepared for market sounding purpose only. All contents are


other purposes."

4. Project Agency Status





Project agency status

Readiness Assessment

Legally entitled to enter into contracts,

granting rights and benefits,

and concession

Capability to implement & monitor PPP

contract, discharge duties &

responsibilities

Proposed EEC policy is clear – Endorsed by

government stakeholders

Clear and effective

allocation of authority and responsibility

5. Project Timeline





Key Project DatesDates Milestones

15 June 2018 1st Market Sounding

22 June 2018 Submission of Questionnaire

September 2018 2nd Market Sounding

4th Quarter 2018 Launch of TOR

+ 3 months Submission of Proposal

1st Quarter 2019 Appointment and Contract



other purposes."


© 2018 KPMG Services Pte. Ltd. (Registration No: 200003956G), a Singapore incorporated company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. This proposal is subject to the satisfactory completion of our customary evaluation of prospective

clients and engagements, and the negotiation, agreement, and signing of a specific engagement letter or contract. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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Contact us:David NgPrincipal, KPMG SingaporeTel: +65 6213 2416E mail: [email protected]



other purposes."

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