TAV Tunisia

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	26913
Company name	TAV Tunisie S.A.
Country	Tunisia
Sector	Transportation and Warehousing
Environmental category	B
Department	Infrastructure
Status	Active

Date SPI disclosed	March 13, 2008
Projected board date	April 17, 2008
Previous Events	Invested: June 20, 2008 Signed: April 24, 2008 Approved: April 21, 2008

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Tunisia’s existing airports are either already saturated (Monastir handled 4.2 mn passagers for a nominal capacity of 3.5 mn) or nearing saturation (Tunis Carthage airport). Due to growing tourism, further encouraged by the current negotiations on an open skies agreement with Europe as well as major tourism and industrial developments planned to sustain the country’s growth, the upgrade and expansion of Tunisia’s airport infrastructure is a key Government priority.

In 2007, the Government of Tunisia awarded two concessions to TAV of Turkey:

- a concession to upgrade and operate the Monastir airport, and
- a concession to build, finance and operate a new airport at Enfidha, also located in the Central Eastern part of Tunisia, 45 km away from the Monastir airport.

Both airports will serve the major tourism areas of Monastir, Sousse and Hammamet, located on the Mediterranean coast. The decision to build a new airport at Enfidha stemmed from the fact that the Monastir airport cannot be expanded on site, owing to geographical and environmental constraints.

TAV created TAV Tunisie, a special purpose company which will be the concessionaire of the two airports. The proposed project is to finance:

- the concession for the construction and operation of a new international airport at Enfidha, for an initial capacity of 7 million passengers and
- the concession for the operation of the existing Monastir international airport (4.2 million passengers in 2006).

The project, with total costs of approx EUR560 million (approximately equivalent to $840 million), will be one the largest recent private sector investments in Tunisia and the 1st airport private sector concession in the Maghreb region.

Project sponsor and major shareholders of project company

The project’s sponsor and major shareholder (99.99%) of the project company (TAV Tunisia S.A.) is TAV Airports Holdings (TAV Airports), a Turkish company headquartered in Istanbul, specializing in airport operation and management.

TAV Airports was established in 1997 after being awarded the BOT concession for the new international terminal in Istanbul and has grown fast to become a fully integrated airport services provider with affiliated companies are also involved, without limitation, in duty free operation (ATU), food and beverage operations (BTA) and ground handling (Havas). In addition to the Istanbul airport, TAV Airports also manages the Ankara, Antalya Gazipasa and Izmir airports in Turkey, and the Tbilissi and Batumi airports in Georgia. TAV Airports is listed on the Istanbul Stock Exchange (18.4% free float) and its main shareholders include the founding shareholders, Tepe (18.9%) and Akfen (15.7%), two large Turkish conglomerates as well as Meinl Airports (10.1%). `

Total project cost and amount and nature of IFC's investment

The project’s total cost is estimated to circa EUR560 mn, to be financed through a 30% equity contribution from the Sponsor and 70% through debt. IFC’s proposed investment will include:

- A-Loan for IFC’s own account for up to EUR135 mn (part of the A-Loan may be substituted by an IFC C-Loan for an amount of circa. EUR30 mn to help strengthen the project’s financial structure if needed)
- Syndicated IFC B-Loan for up to EUR255 mn

Location of project and description of site

- Monastir Airport:

the airport is located 7km from the centre of Monastir, Tunisia’s 11th largest city in terms of population (41,000) located 160 km south to south-east of the capital, Tunis, and a major tourist centre. The city is in the centre of the Tunisian Sahel region, between Sousse to the north and Mehdia to the south. The city of Monastir is connected to the rest of the country through railway service, with multiple daily schedules to/from Tunis, Sousse, Gabes, Sfax and Djerba. The city and the airport are accessible from Tunis by highway (2 hours). The airport itself is close to the coast. In terms of facilities, the airport has one runway, 2950 m long, one passenger terminal (capacity of 3.5 m passengers) and one main apron comprising 25 aircraft stands. The airport is served mainly by charter flights bringing low cost tourists to the surrounding coastal area.

- Enfidha airport:

will be located in the Enfidha district, on the coast, 100 km south of Tunis, served by the Tunis-Sousse highway, a railway station and at a 35 km of the Sousse port (a new deep-water port is planned in Enfidha). The airport will be in the immediate vicinity of the Enfidha industrial zone, a 2 million square meters area earmarked for the development of an industrial zone aiming to attract industrial firms active in the automotive sector. Total airport area will be 5,788 Ha with an estimated total construction capacity of 130,000 square meters. The airport will have one 3,300m long runway and two apron areas, allowing for a total capacity of 32 aircraft stand. Upon completion of the 1st phase, the airport’s capacity will be 7 mn passengers. Subsequent expansions will be realized as needed to satisfy traffic growth. It is expected that the Enfidha airport will cater mainly to tourists.

Anticipated development impact of the project

The proposed project is a central element of Tunisia’s growth strategy: by expanding and modernizing the airport infrastructure of Tunisia, the project is expected to directly contribute to the success of the Tunisia’s economic strategy, which is built on two pillars:

- export-oriented industrialization, in particular with a specialization in low cost light manufacturing and
- tourism development, with major efforts underway by the Tunisian Government to increase tourist arrival numbers and re-position Tunisia towards the higher end of the market.

The project furthers both those goals as:

- it will be critical to the development of the Enfidha industrial district and
- it will considerably expand Tunisia’s tourism capacity by offering a new gateway to Tunisia, as the Monastir airport has reached saturation.

The project, one of the largest private sector investments in Tunisia in recent years, will also be the 1st private airport concession in the Maghreb region and is a key factor in the success of the Tunisian Government’s PPP strategy in infrastructure.

IFC's expected development contribution

IFC’s participation to the project, through the provision of long term senior debt and subordinated debt, with maturities beyond the ones that can be provided by participating commercial banks, is key to the project’s financial structure and its robustness to various downside scenarios. Furthermore, through its B-Loan program, IFC will also substantially enhance the project’s risk profile and mitigate political and convertibility risk, thus allowing for a greater participation of commercial banks to the financing of the project.

Environmental and social issues - Category B

This project has been classified as a Category B project owing to the limited number of specific environmental and social impacts that may result from upgrading existing airport facilities and from construction of the new airport at Enfidha. These impacts, including land acquisition and resettlement (being implemented by the Government) are being managed closely and in accordance to international best practice. The new airport has been planned since 1998 and the Government has conducted several public meetings regarding the proposed development. The Monastir Airport has been in operation for 40 years; the terminal will undergo minor modification, including safety, security and waste management upgrades, as part of the project. The Enfidha Airport is currently under construction and will meet international standards. Based on the location of the village of Hergla and the presence of two Important Bird Areas (IBA) 13 km north and south of the Concession, the Ministry of Environment and Sustainable Development required the suppression of a second (originally planned) runway to eliminate low level flights (and their subsequent noise impact) over human populations and sensitive habitats. No impacts on these IBAs are anticipated due to the project.

The Government has developed a Master Plan for this region of the country which includes development of a deep water Port, Tourism Zone and an Industrial Zone. Consultations on the proposed plans have occurred over the past several years and the project is well known at the local and national level. A Cumulative Environmental Assessment and a Groundwater Study for the Master Plan are currently underway. The Enfidha Airport is not anticipated to have any negative impacts on surface or groundwater. While the project does include Government managed and implemented land acquisition and a small amount of resettlement (20 houses), this process is being managed through a very well defined process as mandated by Tunisian law and consistent with IFC Performance Standards.

Titled landowners are being compensated at independently negotiated market rates and all households will be given titled land adjacent to the concession. Tenancy and livelihoods are expected to be improved as part of this process as all families are being given titled plots adjacent to the Concession and will be compensated for structures and losses. TAV has presented plans to address the impacts and other requirements, and will, upon implementation of specific agreed measures, comply with the IFC Performance Standards on Social and Environmental Sustainability.

IFC PROJECTS

RECENTLY DISCLOSED