VEB is invited to Domodedovo
“Heavy artillery” can be involved in the sale of Domodedovo Airport. As it has been known to Vedomosti, the Investment Fund A1 offers Vnesheconombank (VEB) to make joint purchase of the largest airport in Russia. For this purpose, Summa Group should fall out of the race, and transaction between VEB and A1 should be approved by the Prime Minister, Chairman of the State Bank Supervisory Board Vladimir Putin.
A1, the investment arm of Alfa Group, sent to VEB application for loan to purchase Domodedovo Airport, as the Investment Fund’s spokesman reported to Vedomosti yesterday. He did not specify the requested loan amount, as well as the conditions of raising funds. VEB spokesman refused to comment.
A source close to one of the negotiating parties adds that the question is also about the joint purchase of Domodedovo Airport on a basis of parity. The total contribution of VEB, including loan, may amount to not less than $2 billion, as Vedomisti’s source said. The funds will be attracted upon pledged property of the Airport. A1 offers about $3 billion for 100% of Domodedovo Airport, the same amount is offered by the other Contestant — "Summa Group” by Ziyvudin Magomedov, as Vedomosti’s source said.
A source close to VEB confirmed to Vedomosti the information on the A1 proposal. The negotiations on the joint purchase of the Airport are carrying out, but the agreement on the transaction has not been reached yet, as he says. The decision of this level must be taken by VEB’s Supervisory Board chaired by Mr. Putin, recalls the source close to one of the negotiating parties. Loan for Domodedovo does not under the jurisdiction of the Government, it is a commercial issue, said Dmity Peskov, spokesmen of the Prime Minister: "We shall consider it, accordingly."
However, meanwhile Summa Group has the initiative in negotiating the purchase of Domodedovo. It is the only one of all Contestants who applied for the purchase of the Airport (Goldman Sachs collected applications up to March 1). At the same time, the Summa Group’s application was supported by Sberbank (Saving Bank of Russia) which is ready to provide the company with funds for the transaction. Summa Group’s spokesman refused to comment. A source close to the company has confirmed that the negotiations are continuing. The spokesman of Goldman Sachs refused to comment.
Summa's application for loan of Sberbank is still under discussion, according to a source close to one of the negotiating parties. Within a month the parties expect to resolve the issue with the loan finally. By that moment, it will become clear, whether A1 agrees with VEB, as the source of Vedomisti says.
It is not clear, whether the owners of Domodedovo accept such a proposal. According to a source close to the Airport, they planned to sell it for not less than $4.5 billion. A source close to one of the Contestant explains that the price of $3.5 billion was previously discussed with the owners. Another source close to the Contestant for the Airport says that the quotation has been reduced under the influence of the Federal Air Transport Agency (Rosaviatia) decision not to build a new landing strip in Domodedovo.
The Contestants were not impressed by the financial results of the Airport, according to an employee of one of the companies interested in the Airport. In 2011, the Airport's consolidated revenues amounted to 35.77 billion rubles, EBITDA — 14.95 billion rubles, — according to the Domodedovo Airport Presentation in February (Vedomosti managed to read the document’s fragment). It turns out that compared to the year of 2010, these figures have grown by 19.3 and 17% (revenue – 29.98 billion rubles, EBITDA – 12.78 billion rubles). However, the investment program was financed only by 3.8 billion rubles, instead of the planned 7.3 billion rubles, as it is said in the Presentation. The costs will be transferred to 2012. It means that a new owner of the Airport will have to bear them, according to an employee of a company applying for the Airport. The spokesman of Domodedovo Airport refused to comment these figures due to trade secrets.
Domodedovo continues to show high profitability at the level of the most successful international airports, says Evgeny Shago, Director of the Analytical Department of the Managing Company "Ingosstrakh Investments”. For example, EBITDA margin of the Frankfurt Airport amounted to 34% in 2011. However, in previous years this indicator reached up to 60%. Based on the available data and market condition, Mr. Shago believes that the price of the Domodedovo Airport shall not be less than $3.5 billion.
Forward direction only
This year, the management of Domodedovo Airport expects that Transaero and S7 (the Airport’s largest clients) will increase air transportation by 12% and 11%, respectively. EBITDA margin will be increased to 45%, according to the Presentation of the Airport.