Public Private Partnership for the Norman Manley ...

1 Public Private Partnership for the Norman Manley international airport Kingston, Jamaica November 2016 Norman Manley international airport 1 IMPORTANT NOTICE This marketing document (hereinafter referred to as the Document ) is being issued on behalf of the Government of Jamaica ( GOJ ) acting through the Ministry of Transport and Mining ( MTM ) to the recipient solely to present the proposed Public Private Partnership for the Norman Manley international airport ( NMIA or the airport ) as a business opportunity and to obtain the recipient s preliminary assessment and feedback and an initial indication of the recipient s level of interest in participating in the transaction. The comments and feedback obtained will assist GOJ in deciding how to structure the potential transaction going forward by ensuring that the requirements of prospective investors have been duly considered. This Document does not purport to contain all of the information that a prospective investor may need or desire.

2 It has been prepared to assist interested parties in making their own evaluation. In all cases, interested parties should conduct their own investigation and analysis of the information set forth in this Document. This Document has been prepared by the international Finance Corporation ( IFC ) from information supplied to it by GOJ and the Airports Authority of Jamaica ( AAJ ), as well as several other government agencies and departments. Neither GOJ, nor any of its ministries, departments or agencies, IFC nor any of their agents, representatives or advisors make any representation (expressed or implied) or warranty as to the accuracy or completeness of this Document or the information contained herein and shall have no liability for it or for any other written or oral communication transmitted to the recipient in the course of the recipient s evaluation of the proposed transaction. Only those particular representations and warranties which may be made by GOJ in a definitive written communication, when and if one is issued, and subject to such limitations and restrictions as may be specified in such communication, shall have any legal effect.

3 GOJ reserves the right, in its sole discretion, to modify any of the information provided herein, or without prior notice or assigning any reason therefore, to decide not to proceed with any transaction. Neither GOJ nor any of its agents, representatives, advisors or consultants will be liable or responsible to any person for any cost or expense incurred in responding to this Document or in any investigation or transaction, whether or not consummated, which may follow. This Document does not constitute an offer to sell or solicitation of an offer to buy any security or shares, nor does it constitute an offer to sell or a solicitation of an offer to buy any security or shares in any jurisdiction in which such an offer, solicitation or sale is not authorized, or to any person to whom it is unlawful to make such an offer, sale or solicitation. No representation nor guarantee, implicit or explicit, is made in this Document and no responsibility of any kind is or will be acknowledged by any of the Government of Jamaica, the Airports Authority of Jamaica or the international Finance Corporation in relation to the accuracy or definitive content of this Document, and no responsibility in relation to the use of this Document will be accepted by any of the parties.

4 Norman Manley international airport 2 CONTENTS THE INVESTMENT OPPORTUNITY .. 3 NMIA OVERVIEW .. 4 LEGAL AND REGULATORY FRAMEWORK .. 9 JAMAICAN ECONOMIC OUTLOOK .. 10 THE TRANSACTION .. 11 _____ 3 Norman Manley international airport 3 The Investment Opportunity The Government of Jamaica (the "GOJ"), through the Ministry of Transport and Mining (the "MTM") has initiated the process of implementing a re-tender of a Public Private Partnership ( PPP or the Transaction ) to identify a Private sector operator with proven experience in the aviation sector to finance, develop, operate and maintain the Norman Manley international airport ( NMIA or the airport ) under a long term concession. The previous tender process has been terminated. The GOJ is re-evaluating the Transaction requirements after receiving feedback from investors. GOJ is seeking to: Develop and enhance the position of NMIA as a competitive airport in the region; Increase service quality standards to provide passengers with an improved overall airport experience in line with international best practices; Introduce Private sector finance, technical know-how and operational efficiencies to maintain a state of the art aviation facility; and Mobilize additional Private sector investment in the airport s infrastructure.

5 NMIA is one of the two major international airports in Jamaica, the other being the Sangster international airport (SIA), which is approximately 177 kilometres north-west of Kingston. NMIA will be the only airport included in the Transaction. Initial preliminary estimates of the capital investment for improvements to the airport s facilities and maintenance over the life of the concession are approximately $100 million. NMIA represents an attractive investment proposition. Highlights of the opportunity include: Well maintained and modern airport facility which has undergone substantial expansion and re-development with over US$150 million invested since 2004. Stable and growing passenger traffic coupled with a liberal air services market environment expected to result in passenger growth to 3 million per annum by 2048 from million in calendar year 2015. Cumulative traffic growth for the calendar years 2014 and 2015 was (average of per annum) while traffic growth for the current year to September 2016 is running at 4%.

6 Improving macroeconomic conditions in Jamaica which should support traffic trends at NMIA. Maximization opportunities for retail revenue given opportunities to reconfigure and improve the internal layout of retail and concession areas. GOJ s track record of successful PPP s in the airport and seaport sectors, with Sangster international airport concessioned to the Private sector in 2003. Transparent and competitive bidding process to be conducted. Under a Private operator, NMIA is expected to experience strong improvement in financial performance, with potential for EBITDA margins above the 50% level, in line with strongly performing peers driven by: Aeronautical revenue growth Commercial revenue optimisation Operational efficiencies Interested investors and operators are invited to provide their feedback, outlining their views about the investment opportunity, potential issues affecting the attractiveness of the Transaction, necessary conditions required for the project to be viable, and any additional issues that may be of concern to investors and operators.

7 This feedback will be used to gauge market appetite for the Transaction, which will assist GOJ and its advisors in structuring and implementing a viable project. We would appreciate your preliminary indication of interest, as well as a statement of any areas of concern that you may have by November 11, 2016. _____ 4 Norman Manley international airport 4 NMIA Overview NMIA is located approximately 19 miles from Kingston city centre and is currently the second largest airport in Jamaica after Sangster international airport , located in Montego Bay. NMIA is currently operated by NMIA Airports Limited ( NMIAL ) which was incorporated in 2003 as a wholly-owned subsidiary of the Airports Authority of Jamaica ( AAJ ) and is operated under a 30-year concession agreement with AAJ. Air Traffic Historically, Jamaica has experienced high levels of emigration and now benefits from a strong visiting friends and relatives (VFR) market, with non-resident Jamaicans returning to the island.

8 Jamaica s total international traffic is approximately million passengers, of which approximately 80% is tourist driven and of which the majority (approximately 80%) travels through SIA. Overall traffic levels at NMIA have remained relatively stable in the range of approximately million passengers per annum for the past fifteen years, with some observed year-to-year fluctuations. Passenger traffic is composed largely of visiting friends and relatives (VFR) related to Jamaicans living abroad and business traffic associated with the corporate and government agencies located in the south, central and eastern parishes of the country. The catchment area has recently been expanded due to the improvement in the ease of access from the Highway 2000 project. The newly completed North-South Highway, which opened in April 2016, provides a significantly faster and more direct route to the island s north coast tourist destinations, which are major catchment areas for both VFR and tourist passenger traffic.

9 These traffic components are sensitive to economic trends within Jamaica and hence a continuous recovery of the economy will translate into rapid rates of growth in aviation activity at NMIA. Future air traffic at NMIA is expected to grow in line with the economic growth in source markets in the and Europe, as well as in Jamaica. In the short-term, real GDP growth for Jamaica is expected to be in the 2 3% range in 2018 2020. The Government has established an Economic Growth Council committed to a mandate to achieve 5% growth in four years by 2020. Moreover, low-cost airlines will continue to increase their market share of Kingston traffic. Preliminary forecasts project the number of passengers to increase from million in calendar year 2015 to 3 million in 2048, which represents a CAGR of This projection could however be favourably impacted by a combination of the Government s GDP growth target and the access to tourism traffic on the north coast destinations created be the new highway link.

10 Similarly, preliminary forecasts for cargo traffic estimates a compounded growth rate of from 2015 to 2048. Figure 1: NMIA traffic total passengers by calendar year (000 s) Source: AAJ and LeighFisher forecasts. 05001,0001,5002,0002,5003,00020112013201 5201720192021202320252027202920312033203 5203720392041204320452047_____ 5 Norman Manley international airport 5 Carriers and Routes A diverse mix of passenger airlines serve NMIA, with no single airline accounting for a dominant share of total scheduled departing seats. Caribbean Airlines remains the largest carrier at NMIA with an approximate market share of 25% for 2015. Its major destinations are New York, Ft. Lauderdale and Toronto, as well as a large number of countries within the Caribbean region. The second ranked carrier is American Airlines with a market share of 22%. American Airlines funnels all of its Jamaican traffic through its Miami hub. The third largest airline is JetBlue, at 20%, flying to both Fort Lauderdale and New York.