Guarulhos airport raises concerns for South African operator

Washington DC
Source:
This story is sourced from Pro
See more Pro news »

Airports Company of South Africa (ACSA) calls the tight timetable for infrastructure upgrades at Sao Paulo's Guarulhos International airport a "key risk", as it works to improve the facility ahead of the 2014 World Cup.

The airport operator could suffer from a "negative impact on the Group's reputation" in addition to its exposure to 10% of a Brazilian reals (R$) 884.8 million ($383.9 million) performance bond due in 2014 - about R$88.5 million - according to its annual report for the 2013 fiscal year ending 31 March and released on 30 August.

"Due to extremely tight deadlines, it may be difficult to complete this infrastructure on schedule," says ACSA in the report.

Deadlines include opening a new about 170,000m² terminal 3 at Guarulhos with a capacity of 12 million passengers annually before the World Cup begins in June 2014.

Any additional penalties from a possible delay imposed by Brazil's National Civil Aviation Agency (ANAC) or state-owned operator Infraero would likely be tied up in court before they would impact ACSA's bottom line.

The concerns may be less pronounced than the report makes them seem.

"This may well be a matter of being cautious and disclosing a possible risk even if the company believes it's not likely to occur," says Zane Gresham, a partner at Morrison and Foerster who has worked on airport concession deals. He adds that lawyers often push their clients to disclose all possible risks in an annual report.

Project company Concessionária Aeroporto Internacional de Guarulhos told local media in August that they are on track to complete the core and shell of terminal 3 by October, with commissioning occurring from October through May 2014.

Gresham says that based on his experience the concessionaire has a "pretty good chance" of making that schedule if they do complete the core and shell by October.

ACSA owns 10% of Concessionária Guarulhos along with the Brazilian firm Invepar and had invested South African rand (R) 77 million ($7.7 million) in the airport at the end of March. They were awarded the 20-year concession in June 2012.