Choosing PPP investment form
The Ministry of Transport (MOT) has just issued the Report No. 14075/TTr - BGTVT to the Prime Minister on approving the Project on social capital financing orientation for investment in airport infrastructure.
This project is very interested by many domestic and foreign investors. The reason is not only scale of investment capital in airport infrastructure projects on the priority list within 10 years amounted to VND 479,606 billion, but also the opportunity for them to participate in investment in the form of public-private partnership (PPP) into passenger and cargo terminals with very high profitability.
The Ministry of Transport proposed the Government and the Prime Minister to give opinions on the classification orientation of the airport system and the plan on social capital financing for investment in airport infrastructure of each group in Report No. 14075.
Basing on the Prime Minister's decision on this orientation project, the Ministry of Transport will implement the Project of decentralization and solutions on financing to implement the Master Plan of the national airport system to concretize the management model, decentralize management, specific solutions on financing, mechanisms and policies, implementation roadmap and proposals to the appropriate authorities for comments or decisions on each specific content.
The first important highlight in the Report No. 14075 is that the Ministry of Transport has agreed to select a PPP investment form using existing airport infrastructure assets to participate in the project under the Investment Law on PPP method to mobilize social capital.
In addition, the state management agency in charge of transportation proposed to classify 28 airports in the national airport planning for the period 2021 - 2030 into 5 groups, serving as the basis for mobilizing social capital for investment.
Specifically, group 1 includes international airports of Noi Bai, Da Nang, Cam Ranh, Long Thanh, and Tan Son Nhat. These are national important international airports, playing the role of gathering passengers and cargo to link to the domestic and international flight network.
Group 2 includes Tho Xuan, Chu Lai, Phu Cat and Tuy Hoa airports. These airfields have military operations, regular military training, and airfield assets and land managed by the Department of Defense.
Group 3 includes Dien Bien, Na San, Dong Hoi, Pleiku, Buon Ma Thuot, Rach Gia, Ca Mau, Phu Quoc and Con Dao airports. These are airports in remote, mountainous, and island areas with difficult balance of income and expenditure, with a planned capacity of less than 5 million passengers per year by 2030 (except Phu Quoc).
Group 4 includes Cat Bi, Vinh, Phu Bai, Lien Khuong and Can Tho airports. These are airports with a planned capacity of more than 5 million passengers per year by 2030, with potential for development, capable of attracting investors, and without regular military activities.
Group 5 includes new airports such as Sa Pa, Quang Tri, Lai Chau and potential airports such as Cao Bang, Hai Phong (Tien Lang), the second airport in the Capital region.
For 21 airports currently being operated by Airports Corporation of Vietnam - ACV, the airport infrastructure is divided into 4 clusters for management, operation and investment.
In which, Cluster 1 - Technical infrastructure works to ensure flight operations belong to the essential works of the airport, which is currently a public property at an enterprise managed by Vietnam Air Traffic Management Corporation (VATM) which is a public enterprise with 100% state capital, operating and investment.
Cluster 2 - the works of runways, taxiways and some works in the airfield are public property, the Ministry of Transport is assigned to represent the property owner and perform the management and operation; a few runways and taxiways are managed by the Ministry of National Defense, and ACVs are operated, maintained and repaired.
Cluster 3 – the other essential infrastructure works (apron, passenger terminal, general technical infrastructure of the airport, etc.) are public assets at the enterprise managed, exploited and invested by ACV.
Cluster 4 - Aviation and non-aviation service works such as cargo terminals, hangars, pumping stations, fuel filling stations are currently invested, managed and exploited by the enterprises.
Strong decentralization for the locality
Although it is affirmed that ACV will still play an important role, leading the airport infrastructure investment market, however, the opportunity for private investors’ participation is very high if it follows the orientation of mobilizing social capital for investment at airports proposed by the Ministry of Transport.
Thereof, for group 1 - Noi Bai, Da Nang, Cam Ranh, Long Thanh, Tan Son Nhat airports, the Ministry of Transport will arrange investment capital for the airport (Cluster 2); ACV arranges investment capital for other essential infrastructure works (Cluster 3); mobilize 100% of social capital to invest in aviation and non-aviation service works (Cluster 4) in the form of business investment.
In case the Ministry of Transport and ACV cannot balance investment capital, mobilize social resources to invest in each project in PPP form.
For group 2 - Tho Xuan, Chu Lai, Phu Cat, Tuy Hoa airports, the Ministry of National Defense will continue to manage the airfield (Cluster 2), but will propose to build a mechanism that allows the Ministry of Transport, aviation enterprises are entitled to invest in renovating and upgrading flight areas. In case the Ministry of Defense hands over the airfield to the Ministry of Transport or the locality for management, propose to mobilize social capital to invest in the entire airport in PPP form using existing infrastructure assets to participate in the project; especially many investors are interested in Chu Lai airport.
For group 3 - Dien Bien, Na San, Dong Hoi, Pleiku, Buon Ma Thuot, Rach Gia, Ca Mau, Phu Quoc and Con Dao airports, the Ministry of Transport will transfer the airport (Cluster 2) and ACV transferred the other essential infrastructure works (Cluster 3) to the locality to actively finance for development investment. If the locality does not accept it, the Ministry of Transport and ACV will continue to manage, exploit and invest.
For group 4 - Cat Bi, Vinh, Phu Bai, Lien Khuong, Can Tho airports, the Ministry of Transport will transfer the airport (Cluster 2) and ACV will transfer the other essential infrastructure works (Cluster 3) for the locality to actively finance to invest in developing the entire airport in PPP form using the existing airport infrastructure assets to participate in the project.
For group 5 - new airports, the Ministry of Transport proposes to mobilize social capital to invest in the entire airport in PPP form. People's Committees of provinces with new airport planning are the appropriate authorities to invest under the PPP method, which actively mobilizes and balances resources and organizes investment.
Moreover, the Ministry of Transport's proposal to widen the door for private investors to participate in the airport infrastructure sector also originated from the shortfall in investment capacity of ACV due to the negative impact of Covid-19.
Specifically, when submitting the National Assembly and the Government the feasibility study report of Long Thanh international airport construction investment project - phase I in 2019, ACV confirmed that it has fully allocated 100% of capital needs for essential investment projects according to the planning of 21 airports in the period of 2021-2025; At the same time, more than VND 36,000 billion was arranged from the enterprise's own accumulated capital to invest in Long Thanh airport phase I. As for the capital needs for essential works of airports according to the planning period of 2026-2030, ACV still ensures the accumulated cash flow of VND 120,529 billion to invest according to the schedule.
However, according to the report of ACV and the Committee for Management of State owned capital at Enterprises in Document No. 1125/UBQLV-CNHT dated July 12, 2021, due to the heavy impact of Covid-19 pandemic, the revenue source and ACV's expected profit in the period 2020-2025 dropped significantly.
ACV's pre-tax profit in the period of 2021 - 2025 is expected to be VND 71,624 billion, which will only be VND 36,903 billion (decreased by VND 34,721 billion). Nearly 50% shortfall in the resources, it is difficult for ACV to balance their resources to invest in developing 21 airports in the network.
Therefore, in the period of 2021-2030, ACV shall "cut their coat according the clothes ", only focus on prioritizing resources for Long Thanh airport - phase I and airports that have been and are being invested such as Tan Son Nhat, Noi Bai, Phu Bai, Dien Bien...
It is known that there is a long line of domestic investors interested and eager to research and invest in improving the life of airports managed and exploited by ACV. For example, Vietjet wishes to invest in Chu Lai, Cat Bi, Tuy Hoa and Dien Bien airports. IPP wants to invest in Phu Quoc and Tuy Hoa airports. Vingroup wants to invest in Chu Lai Airport. FLC Group wishes to invest in Dong Hoi Airport.
For new airports, T&T of Mr. Hien has applied to invest in the entire Quang Tri Airport, with a total investment of up to VND 5,822.9 billion in PPP form.
Source : Baodautu
