Cambodia Airp II

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	25332
Company name	Societe Concessionaire de l'Aeroport
Country	Cambodia
Sector	Transportation and Warehousing
Environmental category	B
Department	Infrastructure
Status	Active

Date SPI disclosed	March 7, 2007
Projected board date	April 9, 2007
Previous Events	Invested: July 18, 2008 Signed: June 7, 2007 Approved: June 6, 2007

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

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project company is Société Concessionnaire de l’Aéroport (SCA or the company), a special purpose company that holds a 45-year concession (from 1995) from the Royal Government of Cambodia (RGC) to operate the Phnom Penh International Airport (PPIA) at Phnom Penh, the Siem Reap International Airport (SRIA) at Siem Reap, and the Sihanoukville Airport (SIA) at Sihanoukville. PPIA serves as the main gateway to Cambodia while SRIA mainly caters to the tourist traffic visiting the various Angkor temples located in the nearby Angkor Archeological Park, a UNESCO World Heritage site. Sihanoukville was established in the 1950s and forms together with Phnom Penh and Siem Reap one of the destinations that has been identified by the RGC as cornerstones for the country’s short-term tourism development. The Sihanoukville airport, located 15 km from the city center, was built in the 1960's and remains a small airport with limited facilities. The concession for the development and operation of Sihanoukville Airport was awarded in March 2006 by the RGC to the company. SIA reopened in January 2007.

The proposed project consists of:

- the mandatory capital investments required under the concession for SIA for 2006 and 2007;
- the terminal capacity increase at SRIA to provide service to the increasing passenger growth; and
- the capital investments required at SIA in 2008-10, should traffic at the airport increase in accordance with the company’s projections.

This would be IFC’s second investment in SCA. In June 2004, IFC provided a $10 million loan to SCA to support capital expenditures at PPIA and SRIA.

Project sponsor and major shareholders of project company

SCA is 70% controlled by Vinci Group (Vinci) from France and 30% by a local holding company, Muhibbah Masteron (Cambodia) Company Limited (MMC). MMC is 70% owned by Muhibbah Engineering Berhad and 30% owned by two local Cambodian businessmen, Mr Okhna Kong Triv and Mr Okhna Hann Khieng.

Vinci Group is a listed company trading on the Paris stock exchange and is one of the largest companies in the world that operates in the fields of construction, energy, concessions and production of materials and related services. In the airport sector, Vinci Concessions, one of the four business units of Vinci Group, is active in airport management and ground services. Acting alone or in partnership, Vinci Concessions manages 5 airports worldwide.

Muhibbah Engineering Berhad (ME) is a Malaysian investment holding company which provides civil, marine and structural engineering contract works. ME also manufactures engineering products, distributes and markets construction materials, repairs and builds ships, cranes, trades computer hardware, and invests in properties.

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

Total project cost is expected to be $40.1 million, as follows:

- Terminal Expansion at SRIA (2006) $6.4 million – 15.9%
- Capital Expenditure at SIA (2006-07) $9.7 million – 24.2%
- Runway investment at SIA (2008-10) $24.0 million – 59.9%
- Total: $40.1 million – 100%

IFC would provide SCA with an up to $7.5 million A Loan for IFC’s own account and an up to $10 million stand-by loan for IFC’s own account. The stand-by loan would be available for the company to finance the construction of the new runway at SIA.

Location of project and description of site

- Sihanoukville:

The Sihanoukville airport, known also as Kang Keng, was built in the 1960's. It was and remains a small airport with limited facilities. The airport is located 15 km from the city center and is accessed by a 2 lane road that connects to the main road between Phnom Penh and Sihanoukville.

- Siem Reap:

Siem Reap International Airport is situated about eight kilometers northwest of the city of Siem Reap and serves as a gateway to thousands of tourists visiting the 9-12th century temples in the Angkor Archeological Park, a UNESCO World Heritage Site. A two-lane road (one in each direction) links the airport with the Siem Reap city, where most of the tourist hotels are located.

- Phnom Penh:

Pochentong International Airport is situated about ten kilometers west of the city of Phnom Penh and is the main gateway to/from Cambodia. A four-lane highway (two in each direction) links the airport with the city of Phnom Penh.

Anticipated development impact of the project

The project will have a significant development impact on the Cambodian economy. The RGC is aggressively promoting tourism, especially in the Angkor temple complex near Siem Reap and the coastline near Sihanoukville. Tourism has the potential to become one of the most important sectors of the economy. Expansion and modernization of the airports’ infrastructure is viewed as critical to the RGC’s coordinated efforts to grow the tourism industry as the airports are an essential component of the infrastructure required to support international tourism to Cambodia. In this context, the proposed project would expand the international airports of SIA and SRIA and help the country develop the value of its unique cultural assets of Angkor temples and its coastline. The project will also raise operating efficiency and service levels at SRIA and SIA by adjusting airside and landside capacity to expected passenger traffic, and help SCA meet performance standards established under the Concession Agreement. Finally, the project’s success will encourage foreign investments and further private sector participation in infrastructure projects in Cambodia and privatization of airports in East Asia in general.

IFC's expected development contribution

IFC's investment in the proposed project would provide long-term financing necessary for a concession-based project at a reasonable cost. Long-term limited recourse financing is practically nonexistent in Cambodia from either domestic or foreign sources. The successful financing of the project would also have a strong demonstration effect on potential investors by showing the feasibility of limited recourse project financing for infrastructure projects in Cambodia and privatization of airports in East Asia in general.

Environmental and social issues - Category B

Like the earlier IFC investment in SCA, this is a Category B project because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. In its capacity as the Airports’ concessionaire and in coordination with the RGC, SCA continues to manage its environmental and social performance in accordance with applicable Cambodian laws and regulations and international standards, including the IFC Performance Standards on Social and Environmental Sustainability.

SCA has assessed the anticipated impacts of the proposed project and will put necessary plans in place to ensure that it will comply with Cambodian legislation and IFC’s Performance Standards. Information about how these potential impacts will be addressed by SCA is summarized in Environmental and Social Review Summary (ESRS) available in the IFC website.

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