The sale of another almost third of Athens International airport is confirmed and it has attracted some interesting new (and old) investors

15 November, 2019

The sale of an additional 30% of Athens International airport, which is held by the Hellenic Republic Asset Development Fund (HRADF), is making progress after being suspended for several years on account of the dire Greek economic crisis. In Feb-2019 the procedure for the extension of the concession for Athens International by 20 years until 2046 was successfully completed.

HRADF has received 10 expressions of interest (EoIs) for the acquisition of its stake. EoIs have come from Groupe ADP, APG, AviAlliance, Ferrovial, Global Infrastructure Partners (GIP), VINCI Airports, Ardian, KKR/EGIS Projects, MEIF 6 Attic Investment/Raffles Infrastructure Holdings/Chengdong Investment Corporation, and First State Investments. Macquarie Group had considered an EoI but does not appear to have proceeded with it. The deadline for submission of offers was 29-Oct-2019.

What is interesting is that apart from the ‘usual suspects’ when large and/or capital city airports come to the market – for example Groupe ADP, GIP, VINCI and Ferrovial – this transaction has attracted some dormant investors back into the fold and some entirely new ones to the sector.

CHART - The current ownership of Athens International airport, as at 11-Nov-2019Source: CAPA - Centre for Aviation.

Apart from the 5% held by the Copelouzos family, whose family are co-concessionaires with Fraport in 14 Greek (mainly island) airports, the majority of the equity is held by Avialliance in partnership with Canada’s PSP Investments and through their investment funds, which date back to when Avialliance was Hochtief Airports.

It is perhaps not surprising that Avialliance covets a bigger piece of the action. Athens was the world’s first privately financed airport project on the basis of a BOOT (Build, Own, Operate, and Transfer) concession and it was involved right from the start. In 2018 the airport’s EBITDA margin was 69%.

Moreover, as this earlier article from The Blue Swan Daily shows, the Greek financial crisis has abated. It hasn’t gone away, but in Mar-2019 the government sold 10-year bonds for the first time since before the bailout following the expiration of the third and last Economic Adjustment Programme in Aug-2018 and ironically Greek debt, viewed as poisonous just years ago, is now in high demand as investors seek stable assets amid a global economic slowdown — and a possible recession.

Moreover tourism, while only registering growth of +3.6% in the period Jan-2019 to Aug-2019 has consistently been positive in the years since 2010, only once (2012) falling into negative territory.

CHART – Greece’s annual tourism numbers have been on the rise with continuous growth since 2013Source: CAPA - Centre for Aviation, EL.STAT and Bank of Greece

The tourism growth has helped boost passenger numbers through the Greek capital. In the same time span as for the tourism statistics above, Athens International experienced four consecutive years of losses (2010-13) followed by six years of continuous growth, starting with +21.2% in 2014.

But as with those tourism statistics, it should be noted that growth in 2019 to date (in this case nine months covering Jan-2019-Sep-2019) is only +6.5% – the lowest in the period, as countries such as neighbouring Turkey, and Tunisia, have regained some of their tourist popularity.

So, apart from the ‘usual suspects’, who are the lapsed and new investors examining this opportunity?

Ardian, AXA’s private equity division, entered the sector in 2013 together with AENA, with the acquisition from Abertis of the operating concession at London Luton airport, but exited that arrangement five years later.

Although it has shown interest in Nice Cote d’Azur airport, and more recently in Toulouse Blagnac airport, its current portfolio amounts to just four airports on a minority basis – the three Milan area airports and Trieste Airport, with F2i.

EGIS Projects has a bigger portfolio with nine airports in Europe and Africa (having exited the Brazilian market). It is its consortium partner, the guarded US-based private equity investment group Kohlberg, Kravis, Roberts (KKR), which is the eye-opener.

Having amassed a USD250 billion war chest to finance a wave of infrastructure projects in the US and overseas approximately 10 years ago, and then having eyed the AENA privatisation in 2014/15, it went very quiet, until now. Its re-emergence could be interpreted as a vote of confidence in the sector. It has no airport assets currently.

First State Investments is a new name for a firm that had its finger in many pies in the early days of private sector investment into airports in the 21st Century, when it was known as Colonial First State Global Asset Management and was Australia-based.

Acquired by Japan’s Mitsubishi UFJ Trust and Banking Corp in 2018 and now functioning out of Singapore, it actually has limited practical experience of the sector, although that experience is at three large Australian airports.

APG Asset Management is a privately owned pension fund investment manager based in The Netherlands. It entered the sector in 2016, acquiring, with 3i, Belfast City airport in the UK and then in Mar-2019 Macquarie’s 36% stake in the Brussels Airport Company in a consortium with QIC and Swiss Life, taking a 16.8% stake.

Raffles Infra Holding, again Singapore-based, formerly known as China Fibretech, and an infrastructure investor, has previously focused on Asia and in particular the ‘One Belt One Road’ initiative spanning 78 countries, and of which Athens is an integral part.

Chengdong Investment Corporation is a ‘first’, being the only sovereign wealth fund to be a bidder. It is a wholly owned subsidiary of CIC International, which is itself a wholly owned subsidiary of China Investment Corporation.

The latter two are in a consortium and the third member of that consortium is MEIF 6 ATTIC INVESTMENT SARL, a Luxembourg-based investment company.

All of the above, the ‘usual suspects’, the returning firms, and those new to the sector, bodes well for an arrangement which, during the last year or so, had been struggling to attract many new entrants to replace those like Abertis, mentioned here, which have vacated it in the last few years.