Talks on US$200M airport proposal

The Canadian government-owned company’s proposal for Owen Roberts International Airport involves a capital investment of US$200 million from private sources in order to double the capacity of the Grand Cayman airport and extend the runway, in exchange for a 30 to 40 year concession contract. 

Last week, representatives from Canada and the Cayman Islands-based Paramount Group held three days of talks with officials from the Cayman government and 
business sector. 

The proposal by the Canadian Commercial Corporation – the Canadian government’s international contracting and procurement agency – follows the same concession structure it used in an ongoing US$700 million Quito International Airport project in Ecuador, according to a copy of the presentation the Canadians made to the Cayman Islands Airports Authority, provided to the Caymanian Compass by Paramount. 

 

Concession 

According to the presentation, “An airport concession is not a Privatization or Ownership of the asset in a Concession is 
retained by the CIAA”. 

“A concession is solely the limited transfer of some or all of CIAA owned functions to the private sector for a prescribed period of time, putting an obligation on the concessionaire to finance, build and operate that asset over the period”. 

“In return for this obligation to operate the asset and the obligation of payment to government of concession fees over the period of the concession, the concessionaire receives a right to collect both aeronautical and non-aeronautical revenues associated with the asset and an obligation to use these solely for the project”, the 
presentation continued. 

 

Project details 

The Canadians propose to mobilise about US$200 million 
in private development capital for the project, with the majority of construction work to be carried out by Caymanian-owned companies. The proposal includes “a significant upfront payment to the Cayman Islands” of at least US$30 million, plus annual shared revenue of US$7 million to US$13 million to the airports authority. 

The Canadian government would guarantee the group follows through on contract terms, on both deadlines and budget. 

The project involves doubling the capacity of the passenger terminal building, extending the runway onto land reclaimed from North Sound, otherwise upgrading and improving existing runway and taxiway surfaces, new staff parking, a new northeast perimeter road, and a new general aviation apron (to be provided by a third party). 

Participants during last week’s discussions included the airports authority, tourism association, Cayman Enterprise City, Chamber of Commerce, Civil Aviation Authority, auditor general and government, according to a news release from Paramount. 

“The Canadian team is proposing a privately financed, long-term airport concession that will not require any government funding. The proposal includes a significant upfront payment to the Cayman Islands, a healthy ongoing revenue share to the CIAA, material fiscal savings to the Cayman Islands by transitioning civil servants to the private sector and an overall proposed project investment of approximately US$200M, in addition to the operation and continuous improvement of the airport facilities for a period of 30 to 40 years,” according to the news release. 

 

Background 

In August 2011, Cayman Islands Premier McKeeva Bush announced that Cayman government had signed an agreement with the Canadian agency to explore redeveloping the airports in Grand Cayman and the Sister Island of Cayman Brac. 

In September 2012, the airports authority signed a contract with DSS Contractors to do preliminary work on expansion plans for the Charles Kirkconnell International Airport in Cayman Brac. Further work to accommodate nonstop outgoing international flights is expected 
to begin soon. 

In late April, the airports authority applied to the Development Control Board for permission to build two additions to the Cayman Brac airport at an estimated cost 
of CI$2.5 million. 

1 COMMENT

  1. Why do I get very nervous when my government is about to make another deal? Could it be they have never made a good deal yet? Or is it we always get the short end of the stick? Just asking questions that need to be answered.

  2. Sounds wonderful when do they start? Oops almost forgot did they say reclaim land in the North sound? Well I don’t know we are going to lose a lot of life forms . In fact they may be on the endangered species list . OMG and they are so beautiful ,Its where they grow or are born. Can we really do this?
    You’re dam straight we should do this . Get off your pedestal and get something started before we go extinct!!!

  3. Sounds like a deal that Bush will snub because it sounds like something Cayman could use. I’m sure our attitude will be the usual one of lets not do it beacuse there might be something in it for the investors.

  4. OK so let’s do it. There does not seem to be any down side to this and a big upside. We all now the airport need to be expanded and the government does not have the money to do it. When is this going to start???

  5. Countries are sold on the promise of economic boom through taking on massive debt to build infrastructure that will never reach capacity. In Ecuador there are highways with no traffic, buildings with no tenants – all built on the promise of a massive economic boom that never happened. Their debt cost them their oil rights and they remain a third world country.

    The questions are – does Cayman need the airport to be able to handle double the capacity? Is the current airport running at 100% capacity? How will Cayman realize double the capacity (of the airport passenger volume) if the airport is upgraded? If you borrow 200 million what is the total cost including interest? How much will the operating costs be for the expanded facility? How is Cayman going to pay for this increase in operating cost?
    Can the country upgraded the facility in a more cost effective manner – able to increase load capacity without upgrading non essential sectors? Careful consideration is needed, especially when reviewing information from which decisions will be made. Get a second or third opinion before committing.

    The Cayman Islands people must look very carefully at all plans that commit the country to long term debt. Once a country looses control of it finances to foreign entities it may never regain control of it’s future.

  6. The Canadian government is NOT taking ownership of the airport, they are building a NEW airport — and anyone who travels frequently can plainly see we’ve outgrown our airport, let alone allow for future expansion. OTA clearly hasn’t been flying out of the country lately — often standing room only in the departures lounge. Incoming tourism lines are unreasonably long — do we want to LOSE tourism dollars because people don’t want to stand for 2 hours to clear customs and go to a different island next time? If their first impression is bad, we all lose.
    It’s ridiculous to way we are losing control of our finances WE ARE NOT PAYING FOR A NEW AIRPORT which we desperately need — and once it’s repaid, we get all the revenue from concessions. It’s a good deal for everyone; don’t stick your nose up in the air over it.

  7. Hmm..the math doesn’t add up or I am just doing it wrong.

    So 200 million given to Cayman, in exchange for revenue between 7-13 millino (assume 10), over 30 -40 years (assume 30). 30 yrs X 10 millino = 300 million = 150% return on money.

    Seems we could do better by getting 30 year loan at 5% or so.

  8. I completely agree with your sentiment Bubba. Until an investor comes on Caymans shore willing to invest a truck load of money into the island while looking for nothing in return or given credit for it then also be willing to leave after a short stay, it will be frowned upon.

    As far as reclaiming land in the North Sound goes, yep it will surely effect the Sea Life there and I’m sure plenty of people will say things like it will kill all the sting rays or cause massive flooding. It may even inconvenience a bunch of Sea Captains that will have to sail around it putting their businesses in jeopardy.

    Bottom line is that there will be plenty of people against this for their own reasons no different than the people that will be for it. Caymans leader will have to make the decisions that are in best interest of Caymans future survival even if it doesn’t please everyone, a good leader is more interested in bettering Cayman then their own popularity and getting re elected.

  9. The questions are – does Cayman need the airport to be able to handle double the capacity?

    Yes Cayman does need it

    Is the current airport running at 100% capacity?

    Yes, haven’t you been to the airport on a Saturday??

    How will Cayman realize double the capacity (of the airport passenger volume) if the airport is upgraded?

    More people will be able to be processed, thus more flights will come here.

    If you borrow 200 million what is the total cost including interest?

    It is private money, so don’t worry about it being borrowed. Read the article!

    How much will the operating costs be for the expanded facility?

    Who cares?– it is private money. Again, read the article!

    How is Cayman going to pay for this increase in operating cost?

    Sigh… read the article.

  10. Are all of you serious? Think about it 20-30 years of revenue sharing.

    Myth #1: Yipee..we will be left with an airport we didn’t have to pay for out of our own pocket and then can collect all the revenue! Right, you are left with an outdated airport

    Myth #2: Canada deems it a good idea just to give money to help us. Um, it is costing you quite dearly in concessions (remember Ritz, oh ya got all that back didn’t you).

    Myth #3: We can’t get a loan for this cheap! BS: Why doesn’t the Government put out a Bond Issue to see what might happen? Guarantee it would be less money (in interest) than this is going to cost you!

    Use your brains for a second. Free is never free. See Bugeach (1st comment and frankly the only one out of the below that make sense!)

  11. Cayman government can obtain syndicated loan from banks though at lower interest rate however the Build To Operate scheme is much convincing as private service is more efficient and effective than government controlled operation. The only concern is how to regulate the toll rate without compromising the public interest and BTO operator.

  12. Question about your Myths Gio..

    Myth #1: Yipee..we will be left with an airport we didn’t have to pay for out of our own pocket and then can collect all the revenue! Right, you are left with an outdated airport

    The Project Details mention continuous improvement of the airport facilities for a period of 30 to 40 years, How will this leave Cayman with an outdate Airport ? Wouldn’y have to be maintained for the investors to make money?

    Myth #2: Canada deems it a good idea just to give money to help us. Um, it is costing you quite dearly in concessions (remember Ritz, oh ya got all that back didn’t you).

    I don’t see anywhere in this article where these people suggested they were just giving Cayman money, they are a business and I am sure they expect to make money, they are however offering to share the profits at no upfront cost to Cayman. As far as the Ritz, are you saying that in the years it’s been there that Cayman got nothing out of it such as years of Room fees and Stamp Duty for condo sales. Even with the people seem to forget that even with concessions, Cayman still makes money.

    Myth #3: We can’t get a loan for this cheap! BS: Why doesn’t the Government put out a Bond Issue to see what might happen? Guarantee it would be less money (in interest) than this is going to cost you!

    Why don’t you ask the British why Cayman doesn’t just get a loan to do this, maybe it has something to do with 600 Million that’s currently owed and can seem to get paid back.

    This Airport is no different than the Dump, Cayman could probably get a better deal more to everyone’s liking, but face it people Caymans chickens have finally come home to roost, there is no money in your coffers for these things that happen to be way more important than all the expenditures that sucked up all your money. Ask the people who decided that a 200 Million dollar high school was more important than dealing with that growing pile of garbage. Are that a state of the art Administration Building to keep Civil Servant comfortable was more important than expanding the airport, the list goes on..

  13. We regularly fly through the airport, I still remember the old one, and it never seems that crowded to me.

    Maybe I’ve just been lucky but if you want to experience long lines just try flying into or out of London or Miami.

    I assume right now the government is collecting some sort of fees or concessions from the current airport.

    So this proposal will mean the government will have to give up receipt of those fees for some 30 years.

    Did I read that right? Surely giving up receipt of income is a cost to the country.

  14. If the current flights in and out were spaced further apart timewise then there wouldn’t be such a bottleneck of passengers as happens currently. There are plenty of times where there is nothing going on at the airport. The excuse of saving money with Customs and Immigration hours is rubbish. The same amount of people have to be processed regardless, they just wouldn’t have to stand in line so long if the schedules were adjusted correctly.

  15. @NJ2Cay

    You said Ask the people who decided that a 200 Million dollar high school was more important than dealing with that growing pile of garbage. Are that a state of the art Administration Building to keep Civil Servant comfortable was more important than expanding the airport, the list goes on.

    Those are partisan comments. The growing pile of garbage did not suddenly materialise during the term of the previous govt. It was a problem over the course of a number of govts. Can you tell me what the previous UDP govt. did about the issue? In fact, can you tell me about any major infrastructure project that they completed although they recognised the need for a new govt. admin bldg. (and yes, everyone understood that a new one was needed because the old was essentially condemned, and in order to save on rent) and new high school, (which had they been built at that time would have cost a fraction of the ultimate price tag)? They thought the construction of Boatswain’s Beach which on some estimates cost some 65m plus an annual subsidy of 10m was more important than ANY infrastructure project including the schools, the roads, the govt. admin bldg., dealing with dump, upgrading the airport, building cruise piers etc.

    There is plenty of blame to go around. Let’s not make politics blind us to that fact.

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