fp Turks and Caicos

The history of the joint venture between the TCIG and CACL began in 1998, when the original Providenciales airport was developed. At the time, partnering with CACL offered the perfect opportunity to grow the airport with limited financial risk to the government. Now John Smith, chief executive of the Turks and Caicos Airport Authority, argues that buying CACL shares back is simply a prudent measure.

“We reviewed the current situation and with the support and good corporate citizenry of CACL, we decided it is in the best interest of the country for the Airport Authority to exercise full responsibility for the airport,” Smith said. The new arrangement will offer full benefits to the country at large and TCIG specifically, he said.

Revenue

A large motivating factor for moving forward with the buyout of CACL was to create a steady income stream for the government. Current revenues are shared withCACL, which reduces income significantly. In 2009 a study was conducted to project the potential income to make the business case for the loan. Smith says the projections were conservative, but he is pleased that 2009 was ahead of projections, a large feat in the current economy.

The funds for the buyout will come from a new $20 airport development charge that will be added to the current departure tax fees of $40 per ticket, charged on departure only.

The new charge was determined after a sensitivity analysis showed that only 5 percent of passengers departing from Providenciales are Belongers, which creates a minimal disadvantage for the local population.

Although the previous government had approved a fee of up to $35, the TCIAA settled on the amount of $20. “It is important to understand this is a charge and not a tax,” Smith explained. The difference being a charge can only be collected and used for the purpose specified, and its collection cannot outlast the time frame of the loan it is being used to repay.

Benefits

In addition to the revenue stream which will be created, the reserve build up will also allow for additional development across the islands. Smith pointed to the need for an airport upgrade in South Caicos, but a lack of available funds has put that project on hold. The creation of these reserves for airport projects will help to open the doors for more airport expansion and development projects that are needed across the country.

Currently the airport is significantly exceeding its capacity. The new airport expansion will allow for not only an improvement in the number and size of aircraft that can land, but also the treatment passengers will receive. “Currently the airport does not carry the image of a high end destination we market ourselves to be. It is not the impression we want people to have when they arrive or the last impression they have when they leave.”

The airport expansion will include a resurfaced and extended runway, which will allow the opportunity for larger aircraft to land. A replacement of the perimeter of the facility, which will be expanded to include an additional 138 acres of land. Air bridges for boarding and deplaning will also be seen for the first time in the TCI. Concessions, restaurants and curbside traffic will be improved as well as a new car park with an additional 500 parking spaces.

“The facility will have all the modern amenities, built to the international standards required,” Smith assured.

The Loan

The $100 million loan is for 15 years beginning April 1 7.25 percent interest. Smith says they chose a fixed rate loan in order to mitigate risk as much as possible.

Repayments will be made quarterly and include both principal and interest. At present, TCIAA is not willing to disclose the institution offering the loan because Smith explained that he is leaving the door open to any lender who may offer a better rate. However, he says as a public works project, all details will be disclosed to the public when the final loan is secured.

Part of the funding arrangement includes creating a reserve for the loan, something which has not existed until now. “To be prudent, we have set up a loan reserve, which will allow us to have the equivalent of six installments, which amounts to one and 1.2 years of coverage, should we at any point in time not be able to service payment,” Smith explained. The debt service reserve account will be placed in an escrow account, which cannot be used for any other purposes.

A complete unveiling of the airport plan is expected before work commences in March. A web site is also being developed to provide the public with progress reports and information on the expansion. You can visit their web site at www.tciairports.com.