Viewpoint

March 15, 2021

Asaba International Airport: Build-up to concession, issues, benefits

Asaba International Airport: Build-up to concession, issues, benefits

Asaba International Airport and Governor Ifeanyi Okowa

Asaba International Airport and Governor Ifeanyi Okowa

BY CHRIS ALIGBE

Tuesday, February 23rd, 2021 is a day that will not escape a chapter in the history of Aviation in Nigeria and a reference, even if obliquely, in Africa.

It was the day the Delta State Governor, Senator Ifeanyi Okowa presided over the signing of the Concession Agreement of the Asaba International Airport.  The Airport is the first Brownfield Airport in Nigeria and indeed Africa.

The Concession model adopted is new and first of its kind which has not been used anywhere globally.  This is why it will be a case study and if it succeeds, would most likely ignite a bandwagon adoption.

In this piece, which is the first of three-part examination of the Asaba International Airport Concession, I intend to look at the Build-up to the 5-year long journey, then the Concession itself and finally the merits, critics, criticisms and critique.

As against known models, where a single Concessionaire is engaged, the Asaba Airport model developed the strategy of engaging one Master Concessionaire and seven Sub-Concessionaires.  The Model arose from an incisive analysis of the airport location within both an agrarian and bustling commercial market catchment areas stretching from parts of Edo State through Delta into Anambra State.

More importantly, the decision was driven by the conviction of the State Government that airports are business concerns and can only be better run by those who have the technical knowhow.  In addition to these, is the fact that airport development requires huge financial outlay prior to it becoming a profitable venture. Also, the State Government understands the catalytic impact of a well-run airport to the economy of its area of location, Delta State.

The Asaba Airport was a vision of the Okowa’s predecessor, Emmanuel Uduaghan, who ran the state between 2007 and 2015.  Uduaghan had a vision of an international airport and had tagged the Airport, International.  But the structure he put on ground was far from his vision as it did not even meet the standard for full Domestic operation as the runway and facilities could not accommodate a B737 which most Nigerian Airlines used as at that time.  The numerous technical and safety deficiencies made some of us advise the then State Government to scale down its vision to match what was on ground.  I was one of those.  It was not therefore surprising when NCAA in 2015 down-graded the Airport to Category 3, allowing it to operate only small capacity aircraft and turboprops.

The down-grading came in the wake of Okowa’s assumption of office in 2015.  The Governor was in tandem with his predecessor’s vision of an International Airport and was determined to actualise it.  Hence, he immediately contracted the extension of the runway, the perimeter fencing and the removal of the hilly mound that was a safety threat to aircraft.  After almost 36 months of work, the airport was brought up to the standard that meets all requirements of an International Airport as it offers; a 3kilometre Runway with a width of 60meters, 49.5 sqm Apron, Taxi-way of 1.73km in length and a Terminal Building of 3,600sqm, complete perimeter fence and a 200 capacity Car Park.

While this was going on, Governor Okowa, having been convinced on the need to pull in private capital through PPP, set up a Seven-man Project Steering Committee (PSC) of highly experienced, exposed and cerebral Deltans to further work on the ways and means of actualising his Vision.  The PSC had as its Chairman, the Senior Policy Adviser to the Governor, Professor Sylvester Monye, a Professor of Economics, who has extensive international exposure with financial institutions, some of which include AFREXIM, AFC, AFDB, World Bank to mention but a few.

Monye was Special Adviser to both Presidents Umaru Yar’dua and Goodluck Jonathan and Executive Secretary, National Planning Commission that put together Vision 2020.  The PSC Vice-Chairman was the Chief Economic Adviser to Governor, Barrister George Orogun, with a distinguished career in banking, before joining Delta State administration where he served as Commissioner for Planning and Finance, and developed an indepth and vast knowledge of development matters in the state.  Other members include Dr. Kingsley Emu, a successful Entrepreneur cum Politician, then Commissioner for Economic Planning, the Director-General, Delta State Development Agency, the cerebral Chief Clement Ofuani with a passion for Development issues.

Also, were Chief Job Creation Officer, redoubtable Prof. Eric Eboh and an Investment Analyst, Olorogun Lucky ogbene-Umorun, Director-General, Delta Investment Development Agency.  Along with these were two other members, one representing the State Attorney-General and the other representing the Commissioner for Finance.

The PSC was charged with the responsibility to identify investors that had both the financial and technical capabilities to “complete the airport development and invest further in the expansion and modernisation of the facilities at the airport to meet international standards in terms of efficiency in operations and security of passenger and cargo traffic under a Concession agreement”.

The PSC, fully conversant of the process of Concession knew that the starting point was the engagement of a Transaction Adviser.  This led to the advertised call for bids by potential Transaction Advisers published December 9, 2015 in Vanguard and Thisday newspapers.  By the time the Bid closed at 12noon, January 15, 206, 14 Bids were received on time while 4 which came later were rejected.

Based on the six criteria set out; Specific and Relevant experience in Airport Advisory Work (30%), Experience in Infrastructure Advisory Services (25%), Experience in Financial /Advisory Services (20%), Technical Approach/Work Plan for the proposed assignment (15%), Evidence of Tax Payment to FIRS (5%) and Evidence of Pension Contribution to PENCOM (5%).  The Bids were evaluated.  The Committee set the benchmark at 75% as cut off point.

After a painstaking evaluation exercise, the PSC came out with the following scores: 93% at the high end and 8% at the lowest end.  The Financial Bids showed the N850m at the high end and N25m as the least.  At the conclusion, six (6) out of the fourteen (14) Bids met the benchmark of 75% in Technical Assessment.  The consideration shifted to the Financial Bids.  Matched with the Technical Scores, the following records came out:

Deloitee =93%  N200m

PWC  = 93%   N196m

RoughtonInter.= 88% N213m

Halcrow =  80%  N90m

InfrastructureBank =79% N361m

FBN Capital   = 78%  N850m

Further analyses led the PSC to settle on Halcrow, the fourth best technically but the best financially.  Thus, Halcrow was recommended to the Governor and his Cabinet and was approved as the choice Transaction Adviser.

WHAT DELTA STAND TO BENEFIT

The Transaction Advisers work on the project led to the development of the Asaba Airport Master plan which did not exist before its appointment. The Master plan identified the vision and requirements for its implementation as well as the seven focal business units on which the concession will revolve.

These seven business units are: Cargo, Logistics and Cargo Warehouse, a Tank Farm, a Business Park, a Hotel and Convention Centre, an Airline Operations Hub, and an MRO Facility. These components were the product of the Outline Business Case [OBC] study carried out by the TAs and have become the key components of the novel model of the concession for the Asaba Airport.

The OBC and the Model, clearly reflect the conviction of the PSC that the usual approach of the appointment of a Single Concessionaire will not serve the State Government vision of turning the Asaba Airport into a commercial and service Oasis of global standard within a short period in time.

Hence the PSC recommended the adoption of one Master Concessionaire for the Airport itself who will be responsible for coordinating the remaining Seven Sub-Concessionaires. Three further steps were taken to market the planned concession. These are: extensive interactions with financial firms, aviation stakeholders, regulatory authorities, the media etc.

READ ALSO: Senate to amend laws infringing on women’s rights

Road shows locally and internationally including a meeting with Operators of Guangzhou Baiyun International Airport after presentations on Asaba Airport to Investors. The State Government followed these up with an Investors Conference in Asaba to market the novel model.

On October 9, 2018, an advert was placed for Expression of Interest [EOI] by interested companies. When the bid was opened on 7th December 2018, two Consortia; The first being First Investment Development Company [FIDC]-Menzies Aviation [MA] Consortium with the following sub-concessionaires; Air Peace, Cybernetics International Services Limited, Rain Oil Limited, Radisson Blu Hotels, Quorum Aviation Limited, Avbico Plc and Sibraxis EEG of Greece. The second consortium is  Asaba Internal Airport Development Company Limited, created as a Special Purpose Vehicle [SPB] for the bid.

The Four members of the second consortium are; AI-MS GMBH of Austria, AMD SIGMA, GMBH of Austria, Aviation Infrastructure Research Centre, and ANET Technologies Ltd.

Both consortia having been pre-qualified, conducted their due diligence before submitting their final bids which was opened May 16th, 2019.

For the evaluation, analysis and selection of preferred Bidder, Governor Okowa set up a new nine-man committee which included five members of the PSC [Prof. S. Monye, Sir FO Tilije, Chief C. Ofuani, Olorogun Oghene-Umory, and Dr. K Emu] but the committee was headed by the young, incisive, and broad minded Chiedu Ebie, the Secretary to the State Government [SSG]. Other members that made were Olorogun David Edivbie, a one-time Finance Commissioner under Ibori, Special Adviser to late President Umaru Yar’Adua and the current Chief of Staff to the Governor, Tomiwa Aregbesola [Transaction Adviser Rep] and Frances Eboka, Asst. Director as Secretary.

When the committee settled on FICD/Menzies Consortium [with weighted average scores of 89.33 against 53.10 by the next Bidder] as the Master Concessionaire with its seven sub-concessionaires, the recommendation was made to the State Executive Council. It was approved, and then passed on to the State House of Assembly which in turn debated and approved the recommendations and the chosen Consortium.

The rigorous process the concession passed through in five years and the attendant transparency could not escape the admiration of the Minister of Aviation, Senator Hadi Sirika who during his visit to the Airport, on inspection applauded not only the revamped facilities but also the decision of the state to take the path of concession. He also commended Okowa for recusing himself from the whole process leading to the choice of the TA and the Concessionaire.

After the appointment of FIDC/Menzies, the two agreed in October 2020 to incorporate the Asaba Airport Company Ltd, an SPV for the Management of the Project.

The Terms of the Concession Agreement include: 30 Years tenure, Minimum of 20% Deltans as Staff, and the tax incentives as well as exclusivity that bars the development of any other airport within Delta North Senatorial District.

On the financial side the state will derive a total of N91, 257, 322, 000 [N43, 399, 548, 000 30 years royalty. N28, 000, 000, 000, Capital Injection, N3, 857, 775, 000. 30 Years cumulative Annual Concession Fees, N1, 000, 000, 000 Signature fees N15, 000, 000, 000 cumulative savings of the annual budgetary allocation for running the Airport for 30 years].

Add to these benefits the fact that at the end of the concession the Airport will be returned to the State since it is not sold out as in a privatization. In addition, critics have not considered the forward and backward integration that will arise from the Airport Business Oasis which will be an economic pull and push factor for new StartUps.

For those who criticise the 30 year period, I suggest that they study the Concession model of Havi Mumbai, Hyderabad and Bamgalore Airports in India, El-Alamein in Egypt, Enfindha Airport Tunisia and Pulkovo, St Petersburg and notice that concessions range on the average between 20-35 years with the longest being 72 years.

CRITICS

For those who refer to FIDC as “Baba Ijebu” because of the name Adebutu, it is necessary to point out that the Adebutus starting from Kessington many decades ago carved a niche in the betting business and have established a reputation that has no scandals. FIDC as a protegee carries same impeccable reputation. The issue is not whether it is “Baba Ijebu” “Baba Igbo” or “Baba Fulani” but what it is bringing to the project. Also,Menzie is a global company with Belgium origin and is hands on in the area of transport infrastructure and facility management.

So far, all the critics of the concession seem to have spoken without studying the document. I listened to comments from one Uniport Professor and two others who spoke on the Niger Delta TVC programme on Wednesday the 10th of March and was amused by the complete lack of information and knowledge on the project proceedings.

WHAT DELTA GOVT MUST DO

Finally, the State Government must carry out a Cadastral mapping of the areas bordering the Airports and determine the kind of structures that can be built by landowners to avoid untoward development like you find along Lagos International Airport Road. Also, the government must conduct an Environmental Impact Assessment [EIA] as the Airport will engender environmental challenges if there is no plan that looks at the future.

Most importantly, the State Government should as a matter of urgency establish a statutory agency that will guide the concession to its desired end. It is heart warming that Okowa and the State have purged themselves of the national convention and norm of Governors who spend so much resources building airports only to turn them over to the Federal Government as a burden to FAAN. All such airports are unviable, wasting away and without impacting the people of their states.