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2012-01-12 - 15:04:00 - DJ Spain's Airport Privatization Plan Grounded Amid Market Jitters

DJ Spain's Airport Privatization Plan Grounded Amid Market Jitters

--Potential bidders skeptical about valuations amid tight credit markets

--India's GMR says privatization process in limbo

--Spanish government worried about selling assets at knock-down prices

By Pablo Dominguez and Santiago Perez


MADRID (Dow Jones)--Spain's ambitious airport privatization plan is grounded, with the new government of Prime Minister Mariano Rajoy reconsidering its sale options as bidders fret about the cost of borrowing funds to buy assets deemed to be too expensive.

People familiar with the situation say several bidders are increasingly skeptical about the valuations and conditions set by the previous Socialist government. It hoped to raise about EUR3.7 billion for Madrid's Barajas airport and EUR1.6 billion for Barcelona's El Prat.

Earlier this month, German airport operator Fraport AG (FRA.XE) pulled out of the bidding citing the difficult market situation. Another group, formed by Spain's Fomento de Construcciones y Contratas SA (FCC.MC), as well as Singapore's Changi Airports International and a unit of Siemens AG (SI), may also pull out, according to one person familiar with the situation.

Most other bidders, such as Spain's Ferrovial SA (FER.MC), Barcelona-based Abertis Infraestructuras SA (ABE.MC), Aeroports de Paris (ADP.FR) and India's GMR Infrastructure Ltd. (532754.BY) say they are waiting for the government to indicate how and when the privatization program might change.

"We haven't got any news when (the government) will restart the process," said Sidharath Kapur, chief financial officer of GMR's airport division. The company isn't pursuing the Spanish airports aggressively, Kapur said. "There is no movement ahead, so there is nothing we can do at this point in time," Kapur said in an interview.

The potential suspension of the privatization of Spain's two main airports would represent a fresh challenge to government efforts to improve its stretched finances. Spain has just passed a new EUR15 billion austerity package in response to a wider-than-expected budget deficit. Economists expect spending cuts and tax hikes to weigh heavily on Spain's economy in 2012.

But the government is understandably nervous of achieving only fire-sales prices as Europe's sovereign debt crisis continues to roil financial markets.

"I have several studies on the table to design future (privatization) processes, so we don't sell assets at the worst possible time for our economy, something which was about to happen," Public Works Minister Ana Pastor told radio station Onda Cero Thursday.

Madrid's Barajas airport has growth potential after a EUR6.2-billion expansion completed in 2006 and the recent merger of Spanish flag carrier Iberia with British Airways. The airlines hope to grow their share of traffic between Europe and Latin America. Spain has invested EUR1.2 billion to expand El Prat.

Spain's previous Socialist government, offering 20-year operating licenses for the airport, extended the deadline for bids from October to the end of January.

As well the purchase price for the two airports, the previous administration sought annual payments representing 20% of total airport revenue, including at least EUR150 million for Barajas in 2012 and EUR80 million for El Prat.

"Initial payments are high considering current financing conditions," said Banco Espirito Santo analyst Juan Carlos Calvo. Other analysts think valuations for both airports would need to be lowered by about 25% as the Europe's slowing economy puts a brake on growth in airport-passenger traffic.

Spain's deputy Infrastructure Minister Rafael Catala said earlier this week that the government is expected to announce a decision on the airport privatization plan in coming days.

By Pablo Dominguez and Santiago Perez; Dow Jones Newswires; (34) 91 395 8119;

(Santanu Choudhury contributed to this article.)

(END) Dow Jones Newswires

January 12, 2012 10:04 ET (15:04 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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