Queen Alia

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	26182
Company name	Airport International Group P.S.C.
Country	Jordan
Sector	Transportation and Warehousing
Environmental category	B
Department	Infrastructure
Status	Active

Date SPI disclosed	August 22, 2007
Projected board date	September 27, 2007
Date revised SPI disclosed	December 3, 2007
Previous Events	Invested: December 5, 2007 Signed: November 14, 2007 Approved: October 4, 2007

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Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

In May 2007, the Government of Jordan (GoJ) awarded to a consortium including the international airport operator, Aéroport de Paris Management and the international construction firm, J&P Overseas a 25-year concession for the expansion, rehabilitation and operation of the Queen Alia International Airport (QAIA or the Airport) of Amman. The consortium constituted Airport International Group P.S.C (AIG), a special purpose company which will act as the concessionaire. The concession agreement grants AIG the exclusive right and obligation to provide airport services at QAIA and charge tariffs for these services. Such services include the obligation for AIG to operate, maintain and rehabilitate the existing Airport’s landside and airside facilities; complete the design for, engineer, procure, finance and build a new passenger terminal; and submit and implement a plan to demolish the existing terminal at QAIA once the new terminal is fully operating.

AIG has requested both IFC and the Islamic Development Bank (IDB) to provide financing to the project, which is expected to cost $680 million and includes the rehabilitation of the existing terminal, the construction of the new terminal including related aprons and external works, and the demolition of the existing building. The construction of the new terminal is expected to be completed in July 2011. The project would be financed by a combination of internal cash flow generation ($134 million), equity ($161 million), senior debt ($347 million) and a subordinated loan ($40 million). The senior debt would be provided by IFC and Islamic Development Bank (IDB). The subordinated loan would be provided by IFC.

Project sponsor and major shareholders of project company

The shareholders of AIG (the sponsors) and their respective shareholdings and roles in the project company are as follows:

Aéroport de Paris Management (France) 5% Operator
J&P Overseas Ltd. (Cyprus) 10% EPC Contractor
J&P-Avax SA (Greece) 10% EPC Contractor
Engineering and Development Group (Jordan) 10% Financial Investor
Abu Dhabi Investment Company (UAE) 40% Financial Investor
Noor Financial Investments (Kuwait) 25% Financial Investor

Project Sponsors:

Aéroport de Paris Management (AdPM):

AdPM is the operational division of Aeroport de Paris (AdP) responsible for airport investment, operations and management services worldwide. AdP operates the two main airports in Paris (Charles de Gaulle and Orly), while AdPM operates over 20 airports worldwide. AdP and AdPM’s operations represent an aggregate annual passenger traffic of over 130 million passengers and 3 million tons of freight.

AdPM typically owns a minority shareholding in the airports that it operates. Between 2005 and 2006, the network of airports managed by AdPM saw an increase of 4.8% in passengers, 11% in EBITDA and 19.6% in net income. All these results are above the average of international competitors. The AdP Group is listed on the Paris stock exchange and majority owned (68.4%) by the French Government, with 32.6% of the shareholding owned by private investors.

J&P Overseas Ltd (J&P):

J&P Overseas Ltd (J&P) is the holding company of the privately owned Cyprus originated design, procurement and construction group “Joannou & Paraskevaides”, with current business interests in Europe, the Middle East, Asia and Africa. Transport is one of its focus areas, with 40% of its revenues generated from transport infrastructure projects. J&P has significant interests in the Middle East, with 43% of its 2005 revenues of $924 million originating from the region. J&P has been the main contractor on various infrastructure projects (mainly transport), for a combined project size of over $2 billion in 2005. J&P has a strong track record in the airport construction sector in the region: it acted as contractor for King Fahd International Airport and the airbase facilities at Al Kharj in Saudi Arabia, Abu Dhabi International Airport, the Salalah and Seeb airports in Oman, Lahore International airport in Pakistan and numerous roads, bridges, tunnels and dam projects in the Middle East. It was also the contractor for the construction of 8 hangars at Dubai airport.

J&P Avax S.A. (J&P Avax):

J&P Avax S.A. (J&P Avax) is the Greek subsidiary of J&P, listed on the Athens Stock Exchange with a market capitalization is EUR596 million ($799 million) in 2007. Its main shareholder is J&P. J&P Avax is a significant player in the PPP market in Greece and has participated a contractor and shareholder in a number of projects including those related to the 2004 Olympic Games in Athens: the Athens stadium, the Athens Ring Road (30.8% share of the concession company), and the Rion Antirion Bridge (11.2% share of the concession company). J&P Avax also operates in ten other countries in Europe, the Persian Gulf and Africa, with 20% of its revenues generated in the Middle East and Africa. In 2006, J&P Avax owned assets of $715 million, generated revenues of $483 million, EBITDA of $60 million and net income of $26 million.

Abu Dhabi Investment Company (ADIC):

Abu Dhabi Investment Company (ADIC) was the first investment company in the United Arab Emirates and is now one of the leading financial services firms in the region. Established by Emiri Decree in 1977, the company was 98% owned by Abu Dhabi Investment Authority and 2% owned by National Bank of Abu Dhabi (2%), before the Authority's shares were transferred to the Government of Abu Dhabi's newly-formed Abu Dhabi Investment Council in 2007. ADIC invests in infrastructure, private equity and real estate and provides corporate finance and project finance services. It acted as underwriter/arranger in major power generation and desalinization projects (Taweelah A1, Shuweihat CMS power, Arabian Power Company plant at Umm Al Nar) and gas pipelines (Dolphin), mainly in Abu Dhabi, Dubai and United Arab Emirates. In 2006, ADIC had $1.9 billion in assets and generated operating income of $84 million and net income of $23 million.

Engineering and Development Group (EDGO):

Engineering and Development Group (Edgo), set up over 50 years ago, is the Amman-based investment group of the Masri family with offices across the Middle East and Africa. It is active in the oil, gas, power and water sector as an independent contractor, a joint venture partner or a supplier of equipment. Edgo recently financed or built/supplied a number of projects in the Middle East: Jordan (fertilizer, sewage and water plants, refineries, the British Embassy in Amman), Iran (cement and LNG plants), Oman (LNG, water, oil and fertilizer plants), Lebanon (Beirut International Airport) and other countries in the region.

Noor Financial Investments (Noor):

Noor Financial Investments (Noor) is a Kuwaiti financial investment company, established in 2003 as the financial arm of National Industries Group (NIG), a listed petrochemicals and heavy industries construction group with $4.8 billion market capitalization and asset base of $5 billion. Noor’s main shareholder is NIG (49.5%). Noor has recently invested in infrastructure initiatives where NIG had an interest as contractor, mainly in Kuwait, Pakistan, China and India. In Jordan, Noor recently acquired a 10% stake in the national telecom operator (Jordan Telecom), and invested in the relocation of the Aqaba port. In 2005, its asset base was $396 million and its net income was $51 million.

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

The project cost is estimated at $680 million, to be financed by a combination of debt, equity and internal cash generation. The debt financing would be structured as follows:

- $70 million A loan for IFC’s own account;
- $179 million syndicated B loan;
- $100 million IDB senior financing;
- $40 million C loan (subordinated to A and B loan and IDB parallel financing).

Location of project and description of site

QAIA is located 36 km away from downtown Amman. The new terminal would be located on the area just west of the existing terminal, in a site that belongs to the airport.

Anticipated development impact of the project

The proposed project is a major investment for the Middle East region and the largest infrastructure investment to date in the Kingdom of Jordan. It is intended to address the constraints on public resources available to support the airport expansion in line with capacity needs, and free public resources to other sectors such as social sectors, and as such, enjoys strong Government support. Additionally, QAIA is the main international airport of the country and its expansion is critical to support the tourism industry, which is of vital importance for the Kingdom’s national economy, as it contributes to approximately 10% of the country’s GDP, is the largest export sector and the second largest private sector employer. Finally, the airport expansion will support the significant growth in foreign trade (imports have increased by an average of 15.4% per year since 2000, exports have increased by 20.9% on average over the same period).

The economic benefits of the project are based on the incremental traffic flow that will be enabled by the expanded capacity at QAIA, and will accrue to the GoJ through the generation of additional royalties via the payment of a concession fee; the customers of the airport including carriers, shipping companies, cargo owners, business and pleasure passengers; and the airport’s employees.

Significant benefits of the project include the increased level of service at the airport, the expected increase in the skills of the workforce and related salary increases. It is also expected that the Project will facilitate the arrival of more travelers to Jordan, hence helping the tourism and hotel industry.

IFC's expected development contribution

Commercial banks have indicated that they will not participate to the financing unless a multilateral provides an A-loan. To date international banks have not provided stand-alone loans with long maturities for projects in Jordan.

The sponsors have also approached Jordanian banks for local currency financing. The local banks have offered a maturity not exceeding 10 years, which the Sponsors considered too short.

Environmental and social issues - Category B

This is a Category B project because a limited number of specific environmental and social impacts may result from upgrading existing airport facilities and developing a new terminal. The concession agreement requires AIG to adhere to applicable Jordanian Environmental and Labor laws and standards, as well as to several specific environmental design and operating criteria and some specific, recognized international standards. AIG 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.

The Airport is located in a relatively remote area – increased noise levels are not expected to have any impact on the sparse residential areas in the vicinity. Because the project is limited to the construction of a new terminal and related infrastructure at an existing, operating airport, there is no need for additional land acquisition and access. Nor are there any threats to biodiversity, including habitat destruction, owing to the airport’s desert surroundings. There are no indigenous peoples affected by the airport development. During construction, should any fossils, coins, articles of cultural value or antiquity or other similar remains be found, AIG is required under the concession agreement to immediately inform the relevant Government Authority and effect such investigations deemed necessary by the Authority.

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