Maldives: Some Unknown Facts About GMR’s Mission – Analysis


By Rajeev Sharma

The controversy regarding GMR and its airport project in Maldives having gone sour has created waves in the Indian media. However not much is known about the financial and legal details in this regard. Here is a broad brush picture giving an account of the hitherto unknown facts.

The assessment on the progress of operating and developing the airport together with the Maldives government started on August 25, 2010. The bid documents and other related papers were checked, revised and relevant persons in the Public Enterprises Monitoring and Evaluation Board ((PEMEB) of the Ministry of Finance were interviewed.

As an announcement made by Investment Maldives in December 2008 seeking a party to operate Male International Airport failed to garner any attention from the public, a financial advisory agreement seeking professional advice on airport privatization was signed with International Finance Corporation, a World Bank affiliate, started on July 28, 2010. The purpose of this agreement was to seek a partner to buy 49% of shares of the state-run Maldives Airport Company Limited (MACL) or a party to develop the airport together with MACL under private-public partnership for the GoM for a decided period, under a competitive bidding process.

In return, the GoM was required to pay USD $15,000 to IFC on the day of signing the agreement. USD $ 15,000 was to be paid from the moment IFC starts work and USD $ 20,000 was to be paid upon submission of transaction structure report. Further, another USD $ 15,000 was required if IFC’s service period exceeded 12 months. Once the project was awarded, the bid winner too was required to pay IFC the higher amount between 1% of the project and USD $ 750,000.

The bid documents and other necessary information under this agreement were prepared by IFC. The following outlines the progress of the bid process.

1- IFC agreement 28/7/09
2- Transaction Structure Report
3- Announcement 6/10/09
4- EOI acceptance
5- Sending RFQ 23/12/09
6- Pre-qualification Application acceptance 17/1/10
7- Pre-qualification evaluation 20/1/10
8- Sending of RFP/IM 18/3/10
9- Bid opening 20/6/10
10- Bid Evaluation 24/6/10
11- Signing the agreement 28/6/10

A December 2010 report by the stakeholders on assessment of the Male International Airport privatization said the airport does not suit the standards of the International Civil Aviation Organization. The GoM was advised that USD $ 377 million was required to upgrade the airport to meet those standards, airport development charge needed to be applied, and that there were two ways of buying investment for the airport. One, selling the shares and the other was making a concession agreement.

Thus, it was estimated that if 51% of MACL’s shares were to be sold the GoM will at net present value receive revenue of USD $203.9 million as dividends and service charge. However, according to the presentation, if a concession agreement is made, the occupier must pay an occupancy fee and an estimated 5% of their income to the government. The report put the expected net present value of the GoM’s expected revenue under this concession at USD $ 243.6 million.

The Maldives’ Ministry of Finance and Treasury on October 6, 2009 issued an announcement to seek interested parties to buy MACL’s shares. In this announcement the GoM had said that they would leave control of the airports company and restructure the building and agree for a more flexible investment plan. The shortlisting criteria of parties submitting EOI (Expression of Interest), was said to be experience of serving more than 3 million passengers a year, and financing and operating the airport. It was also mentioned, in relation to the initial announcement that, a party could form a consortium with another party in order to achieve the mentioned criteria. It was also mentioned that after the assessment, the shortlisted candidates would be sent a Request for Qualification (RFQ) in December 2009 and a Request for Proposal would be sent afterwards. Once the confidentiality agreement is signed and sent along with EOI, the party would get the opportunity to visit the venue and seek more information.

Below are the details of parties that submitted Expression of Interest (EOI) and their dates of submission.
Tepe Afken Airpoerts TAV (21/10/2009): Informs that they currently operate 11 airports, serves 41 million passengers and the company has a market value of USD $ 5 billion.
Flughafen Zurich AG (Unique) 29/10/2009: Operates 10 airports including (Zurich airport and Bangalore airport, serves 22.1 billion passengers and generates an income of USD $ 780 million a year and have won the best airport in Europe for a second time in 2008. However, they do not develop airports
GMR infrastructure Limited (30/10/2009): The company submitted that its assets were worth USD $ 2.98 billion and projects worth USD $ 9 billion were in progress. The company identified itself as the designer, developer and operator of Rajeev Gandhi International Airport in Hyderabad serving 6.2 million passengers which then served 22 million passengers in Delhi’s Indira Gandhi International Airport. In addition, the company said it was also operating an airport in Istanbul Airport that serves 5 million passengers. They also said that they would form a consortium as mentioned in the RFQ and further claimed to be operating businesses in coal mining, highway construction as well as other infrastructure development.
Aeroports de Paris Management (ADPM0 (30/11/2009): Operates the airport in Paris, has invested and operates 30 airports from around the world and serves a total of 130 million passengers. Also claims to generate revenue of Euro 2.5 billion.
Reliance Airport Developers Private Limited (30/11/2009): Operates 5 regional airports in India and has formed a consortium with Mexico Airport operators in 2007 to bid together. They also claim that the reliance group is worth USD $13.6 billion.
Larsen and Turbo Limited – Chennai 5/12/2009: Claims to run different industrial businesses and worked in the infrastructure of airports in Hyderabad, Bangalore, and Delhi of India and apart from road, harbor and power plant infrastructure. The company is worth USD $ 7 billion. However, it is not known whether the company operates airports.
Egis Projects, Aeroports de la Cote d’Azur and Mauritius Commercial Bank (MCB) Capital Partners (9/12/2009): The company’s assets are worth Euro 200 million and operate four international airports including Nice Airport in France. They also claim to have served nine million passengers in this airport.
SNC-Lavalian Inc/ Vienna International Beteiligungs Management GMHB on behalf of Fulghafen Wein AG (Vienna International Airport VIE (19/12/2009): S.N.C was responsible for constructing and engineering International Airports at Canada, Moscow, France, Spain, USA and Libya and also informed that V.I.E is in charge of Vienna Airport operations holding passenger traffic of 19.7 million and generates a revenue value of 548.1 million Euros.

In this report, Incheon International Airport is listed to have submitted E.O.I while there is no written evidence or that this company had ever submitted an E.O.I. there is no available EOI from the company either. There’s no justification as to why Incheon International Airport was listed as to have submitted EOI instead of Larsen and Toubro Limited.

The standards for evaluation of the prequalification applications are listed below.
Technical Criteria: Candidate or in case of a consortium, at least one member of the consortium must have within the past 10 years for a period of 5 years operated an airport that serves more than 3 million passengers per year.
Financial Criteria 1: Candidate or in case of a consortium, the average annual turnover of the financial investor for the past 5 years must be above USD $ 200 million.
Financial Criteria 2: Net worth must have been above USD $ 50 million every year during the past 3years.
In case of a consortium, the net worth of the whole consortium must have been above USD $ 100 million every year during the past 3 years
The net worth of the financial investor in the consortium must have been above USD $ 50 million every year during the past 3 years.

All three bids presented had passed the technical evaluation and gone to the financial evaluation.
There was nothing that contradicted the technical requirements in all three bids. As per RFP technical bid, all three had the necessary requirements as mentioned above.

The writer is a New Delhi-based journalist-author and strategic analyst who can be reached at [email protected].


SAAG is the South Asia Analysis Group, a non-profit, non-commercial think tank. The objective of SAAG is to advance strategic analysis and contribute to the expansion of knowledge of Indian and International security and promote public understanding.

Leave a Reply

Your email address will not be published. Required fields are marked *