Argentina Airport System

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In February 1998, the Argentine Federal government signed with Aeropuertos Argentina 2000 (AA2000) a 30-year concession for the operation and rehabilitation of 33 airports. At that time, the 33 airports had a capacity of 13 million passengers per year when they were awarded to the private sector. The winning consortium committed to pay US$ 171.1 million per year in concession fees (the present value of these fees for in the 1998-2005 period were estimated at US$887 million using an annual discount rate of 11.37%; this is the rate used by the local government in other infrastructure sectors). The sponsors also committed to invest US$ 2 billion in infrastructure over the 30-year concession period. Of that amount, US$800 million had to be invested during the first five year of the concession. Initially, AA2000 was owned by Corporacion America (35% of the shares), Ogden (28%), SEA (28%), Simest (8%) and Amadeo Riva (1%). By 2005, the ownership structure of AA2000 changed to Corporacion America (89%), SEA (10%), Amadeo Riva (1%). But, a sale of 26% stake from Corporacion Americana to SEA was pending the approval of the regulator Organo Regulador del Sistema Nacional de Aeropuertos (ORSNA). In 2004, AA2000 announced to float up to 33% of its shares in the Buenos Aires stock exchange, but it is unclear if share were floated and what share of the capital represented. The concession contract was awarded through an international competitive tender carried out in late 1997 and early 1998. Four consortia were qualified and submitted final bids. The consortium were: US Ogden Corp and Argentine Corporacion America, with Italy's Societa Per Azioni Esercizi Aeroportuali (SEA) as airport operator; local Grupo Macri and Argentine investment fund Exxel Group, with Frankfurt airport as operator; Argentine Cartellone and Bulgheroni, German MAN AG unit Ferrostaal, Italy's Impregilo and Britain's London Supply, with Paris airport as operator; and Spanish Banco Central Hispano Americano and Dragados y Construcciones with AENA airport operator. The winning bid was selected based on the highest annual royalty, which was set at a minimum of US$40 million. The consortium led by Ogden Corporation (later renamed AA2000) won by offering to pay annual royalties for Argentine pesos 171.1 million (at that time US$171.1 million) during the concession period. Initially the consortium offered Argentine pesos 118.2 million (US$118.2 million), but raised its offering after the government announced that the offers of three bidders were within 5% difference so they could submit new bids to select the wining bid. The group led by Italy's Impregilo Spa, bid $162 million; while a group led by Argentina's Macri family offered $152 million. Since 1999 the sponsors had difficulties in honoring the payment of the annual concession fee, and requested to reduce fee payments. Since then sponsors and the government had had disputes over payment of lease fees and investment commitments. In 2003, Aeropuerto Argentina's contract was called for renegotiation under the federal government’s renegotiation unit (Uniren) as many of the privatized companies’ contracts. An initial agreement was signed in July 2005. The concession contract was finally renegotiated between Uniren and AA2000 in July 2006, but was pending of Congress and presidential approval by December 2006. Under the new agreement, investment commitments were to be agreed every five years. For the first five years starting in 2006, AA2000 consortium committed to invest pesos 1,140 million (or US$374 million). There was no information on the revised investment commitments for the period from 1998 to 2005. The renegotiation agreement changed annual concession fees since 2006 from annual payments of Argentine pesos 171.1 million to 15% of concession revenues, which amounted to around Argentine pesos 120 million (or US$39 million) in 2006. As part of the renegotiation agreement, Uniren recognized that concession fee payments plus compensations for concessionaire’s losses due to regulatory decisions amounted to 50% of the committed concessions fees in 1998-2005. The present value of concessions fees due in 1998-2005 was estimated at US$986 million in 1998. In the renegotiation agreement, the government was given a 20% stake in AA2000 as payment of 58.43% of the outstanding concessionaire debt to the government which amounted to Argentine pesos 850 million as of December 2005 and included concession fee payments after adjustments for regulatory decisions, inflation, and interest. The rest of the debt to the government was to be paid using different schemes such as earmarking part of concession revenues, and debt instruments such as emission of shares and negotiable bonds. In sum, the renegotiation reduced in roughly 30% concession fee commitments by giving to the government a 20% stake in AA2000. In December of 2006, the airline associations Iata and Alta called on the Argentine government to cancel its concession contract claiming that it has not fulfilled its obligations to Argentina, including debt. In December 2007, the concession was renewed until 2028 after executive approval from the president. The renegotiation agreement regarding the investment obligations with congress also went into effect at this time. The private share was reduced to 80% and investments of US $698 million were to be invested during the concession period. The majority of investment was to occur before 2010. The canon to be handed over to the state, however, was be changed to 15% of the operator's revenues, effectively reducing the fee from a fixed 170mn pesos (US$54.2mn) a year to an average of 90mn pesos. At the time that the concession was granted, the expected revenues over the life of the contract were US$ 20 billion. In 2006 private share (80%). Investment in government assets (US$311 million) and investment in facilities (US$325 million).