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BUSINESS
Rs 300 crore performance guarantee and withdrawal of first right of refusal for new airport were the big put-offs
TRENDING NOW
The were two major reasons that led to the withdrawal of the Piramal-L&T consortium’s German partner from the race for a stake in the Mumbai airport.
According to L&T Infrastructure Development Projects Ltd chief financial officer Y M Deosthalee, “The commitment of Rs 300 crore as performance guarantee and last minute withdrawal of the first right of refusal for new airport compelled our German partners to move out of the bidding process.”
The new guideline of the government has removed the first right of refusal clause for new airport. Under this clause, winners of the bid of the two metro cities had the first right of refusal for any new airports in these cities.
“The new term alters the financial dynamics of the airport operation. It puts the commercial viability of existing airport in question,” says Deosthalee.
The foreign airport operators feared that once the new airport came up, the traffic from the old airport would dwindle, and that would hit their returns.
According to sources, the new guidelines state that if the financial bid of a new bidder for a new airport were to offer returns, which would be more than 10% higher than those managing old airports, then the government would have the right to select them as airport manager.
Hochtief Airport GmbH spokeswoman Donatella Gasser told a wire service that, “Risks have emerged that we didn’t know about before.”
In Piramal Holdings Ltd official general manager (corporate & strategic planning) Pranav Dholakia’s words, “The final bid document had clauses which our German partners were not comfortable committing to.”
Since Hochtief AG decided to drop out from the process of bidding at the last moment, the other two partners could not do much to save the situation. “We tried out ways and means to make it work but their board finally decided not to bid,” says Pranav Dholakia.
“It was too late to get in a new partner. The last date of forming the consortium was May-end, which was extended to first week of June. So as per the rules of bidding, we knew we couldn’t do much,” adds Dholakia.
The Piramals and L&T have sought for an extension of submission date by 15 days to a month, but they do not expect anything to come out of it.
Hochtief exited from the race a day after Singapore’s Changi Airport Enterprise Pte, partner in the Bharti-DLF consortium backed off.
With these two consortia bowing out, it leaves only six bidders for the modernisation and restructuring of Mumbai and Delhi airports.
The other foreign airport operators that have collaborated with Indian companies to bid for the airport privatisation include Fraport AG, Aeroports de Paris, Flughafen Muenchen GmbH and Sydney-based Macquarie Airports.
Air pockets
Foreign operators feared that once the new airport came up, traffic at the old airport will dwindle
Since Hochtief decided to drop out at the last moment, Piramals and L&T Infra-structure could not do much to save the situation