1. DIAL- A case study of successful
Public Private Partnership

2. India is expected to recapture its lost glory in the years to come…
India’s share of World economy over the centuries
• India’s GDP will exceed that
of G6 in:
– Italy – 2015
– France/UK – 2017
~5% of – Germany – 2020
world – Japan – 2025
GDP in – US - 2045
2001
2

3. … driven by the improving per capita income
100,000 100,000
USA, $91,683
90,000 •USA, $91,683, CAGR 1.7% 90,000
80,000 Russia, $78,576 80,000
70,000 70,000
•GDP per capita, USD
60,000 60,000
China, $49,650
50,000 50,000
•China, $49,650, CAGR 6.6%
40,000 40,000
Brazil, $49,759
30,000 •GDP/Capita 30,000
1033 •8X •20X
20,000 •4X 20,000
•2X
10,000
India, $20,836 10,000
•India, $20,836, CAGR 7.6%
0 0
2009 2010 2015 2020 2025 2030 2035 2040 2045 2050
Projected GDP/Capita for India will be growing by 20x
3

4. Indian economy expected to grow faster than its peers in the emerging world
mainly driven by growth in the services sector
Per capita income
(USD) 100-500 500-1000 1000-3000
100% Community, Social & Personal Services
90%
Financing, Insurance, Real Estate &
44%
Contribution to GDP
80% Business Services
70% Services Transport, Storage & Communication
65% 75%
60% Trade, Hotels & Restaurant
50% 18% Construction
40%
Electricity, Gas & Water Supply
30%
19%
20% 38% 16% Industry Manufacturing
10% 16% Mining & Quarrying
9%
0%
Primary Agriculture, Forestry & Fishing
1950-2000 (Avg) 2009-10 2019-20
Source: GOI Statistics, CMIE
• Services to lead the growth in Indian economy
• Transport and communication (25%), Trade, Hotels & Restaurants (15.9%) with
BFSI (15.8%) sectors will drive the Indian economy in the 2020s
4

5. Investment in Infra is expected to continue at a robust pace ...
•Projected Infrastructure spending •Capacity Shortfall in Infrastructure, 2007-12
($ Billion), 2007-12
100%
Total investment over plan period: 478 Bn $
Ports 27%
$16 Others 80% 42% 40% 41%
$82 Power 51%
Civil Aviation $193
60%
$16
Highways
$73 40%
73%
58% 60% 59%
Railways 49%
20%
$98
0%
Power Telecom Airports Roads Ports
## Others include telecom SEZ's, supporting infra, water & sanitation,
state & rural roads, logistics, pipelines etc. Projected Gap Installed Capacity
•Source: Planning Commission
• There is huge opportunity for investment in Infrastructure growth in India
• Even 15% of market share of the power shortfall will require an investment of USD
30 B, sufficient to meet a medium to large company’s aspiration
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6. ... with the private sector increasing its contribution to the sector
5 year plan Total Private Sector Foreign
Investment share % investment %
11th plan - USD 478 Bn. 33% 8%
2007-2012
12th plan - USD 1 Tr. 50% ?
2013-2018
Infrastructure investment to double in the next five year plan; need to increase
foreign investment in the infrastructure sector
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7. Aviation infrastructure will be driven by the unprecedented growth in
demand (1/2)
•Air Passengers (per thousand)
1800 Per 1000 persons
1600
1400 2008
1200 2018
1000
800
600
400
200 85
47
0
Turkey
China
GCC
India
Russia
Indonesia
Brazil
South Korea
Source: ADB, Bloomberg, GS Research
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8. Aviation infrastructure will be driven by the unprecedented growth in
demand (2/2)
Passenger traffic at Indian airports 2000-2020
450 Mn
400 Mn
123 Mn
39 Mn
•Historical: AAI Data
•Projections: CAPA
• Air passenger traffic has increased from 39Mn pax in 1999-2000 to 123 Mn pax in 2009-10
• While airlines have managed to serve additional 84Mn pax, infrastructure has struggled to
cope with the increased demand.
• Infrastructure to serve additional 300Mn pax by 2020 would be challenge
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9. Investment in aviation infrastructure needs to keep pace with the
projected growth of traffic
• Clearly the aviation infrastructure needs to keep pace with the unprecedented growth of
traffic
• MOCA (Ministry of civil aviation) proposed 40000 INR Cr. (8.9 Bn $) investment to
modernize Indian airports
• Given the financing and execution capabilities of the private sector, PPP seems the major
way forward
• 4 Indian airports with ~ 50% share of Indian PAX traffic already privatized
Source: Planning Commission, Govt. of India
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10. Globally, PPP model for infrastructure development is catching up
• Developing economies exploring PPP model to fund capital intensive infrastructure
development
- Countries in Eastern Europe and Russia are seeking investment in
developing/expanding their airports through this model
- African and South American nations are expected to deploy similar model for
development of infrastructure
• Even developed economies are exploring this option to finance their infrastructure
expansion / replacement / maintenance requirements
•PPP model is gaining popularity in international market, competition may become more
intensive
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11. Concessions: Indian context
Operating Concessions Indirect Financing Concessions
• User Charges • Annuities
• Tolls • Fuel Taxes
• User Development Fees
• Airport Development Fees
Concessions in
Indian PPP
(Infrastructure)
Non-Operating Concessions Context Government Financial Support
• Land in lieu of development • Government Grants
• Transfer of Development Rights • Government Guarantees
• Property Development • Government Equity
• Could be transit related Participation
developments • Government Debt
• Advertising Rights • Preferential Tax Treatment
11

12. DIAL is a glowing example of success of the PPP model in the Indian context
•A USD 2.8 Bn project developed as a JV between GMR Group(54%), Fraport (10%), MAHB
(10%) and AAI (26%)
12

13. DIAL is a glowing example of success of the PPP model in the Indian context
• Terminal building with a size of 5.02 mn Sq ft which is 8th largest
terminal in the world. 34 million passenger capacity.
• 78 Aerobridges with 3 numbers A380 compatible which is highest in
the world in a single terminal
• 92 Automatic walkways (Travelators). One of the longest Automatic
walkways in Asia with 118 meters at Domestic pier.
• 71 elevators & 34 escalators
• 5 level in-line baggage screening system with the capacity to handle
12,800 bags/hour
• 28 meter high glass roof ceiling for natural lighting in to the
terminal
• Energy efficient and environment friendly terminal. Applied for
LEED certification (Green building) in Gold category
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14. DIAL PPP structuring - Identifying the project
Traffic growth at Delhi airport
70
60
50
•DIAL catered to ~21% 40
Mn PAX
of Indian air traffic and
was seeing 30
unprecedented growth 20
10
0
2001-02 2002-03 2003-04 2004-05
All India 40 43.7 48.7 59.5
Delhi Airport 8.2 8.8 10.2 12.8
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15. DIAL PPP structuring - Timelines
June 2003 Bidding Timelines
AAI board
approved the 2006
modernization Apr 2005 Award of
proposal RFP Issued contract
Feb 2004 Sep 2005
Invitation for Submission of
EOI for project Bids
issued
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16. DIAL PPP structuring - Defining the scope
Transaction
• 30 year concession agreement with further 30 year option
• Retention of all staff initially and significant numbers after 3 years
• ~2400 AAI employees in 2006
Infrastructure
• Mandatory capital expenditure program with key projects to be completed
by March 2010
• PAX: 46 Mn. by 2025; Cargo: 1.5 Mn Tonnes by 2025
Services
• ATC would be still under the control of AAI/DGCA
• First right of refusal if within 10% of best bid for any airport within 150
km
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17. DIAL PPP structuring - transaction structure
MOCA
Shareholders
Agreement (SHA) JV partners AAI
Operation Management
and Development
74% 26% Agreement (OMDA)
JVC Company
Central Government State Government
State Government Support
Agreement (SSA)
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18. DIAL PPP structuring - transaction structure
• The AAI (Airport Authority of India)
Act was amended in the year 2003 to
MOCA incorporate a new section wherein
the private airport operators were
Shareholders granted the same right as that of AAI
Agreement (SHA) JV partners AAI
under the AAI Act.
• Specifically section 12 A (4) grants all
Operation
74% 26% Management and the function of AAI to private
JVC Company Development operators. Reproduced below: "The
Agreement (OMDA)
lessee, who has been assigned any
function of the Authority under sub-
section (1), shall have all the powers
Central Government State Government of the Authority necessary for the
performance of such functions in
State Support State Government terms of the lease”
Agreement (SSA) Support Agreement
(SSA)
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19. DIAL PPP structuring - Qualify to bid
Criteria Weightage
Management capability, 100%
commitment and value add
Experience of the nominated 25%
airport operator
Experience of the other prime 12.5%
Technical members
Criteria Commitment of airport 12.5%
operator
Commitment of other prime 12.5%
members
HR approach 12.5%
Transition Plan 12.5%
Stakeholder and environment 12.5%
management
Development capability, 100%
commitment and value add
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20. DIAL PPP structuring - Qualify to bid
Name of bidder Management capability Development Capability
Reliance-ASA 74.8 81
GMR-Fraport 81.7 80.1
DS Construction-Munich 73.3 70.5
Sterlite-Macquarie-ADP 53.5 61.9
Essel-TAV 40.4 41.4
•All the consortiums had an Indian partner with foreign operator who
brought valuable technical experience
•Only GMR met the cut off criteria of 80% ; it was given the opportunity
to match the highest bidder
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21. DIAL PPP structuring - Bid Accurately
Commercial
Non-Aeronautical
Aeronautical Aero-Related Property
(Terminal)
Development
Landing and Advertising
Cargo Handling
Parking Charges Charges
Passenger Ground
Retail and F&B
Services Fees Handling
•Hybrid Till Model with revenue
Fuel Farm requirements from Aeronautical
Flight Kitchen Car Parking
charges
sources subsidized by 30% of
revenues from Aero-related and
non-aeronautical revenues
Land and Space Other
Rentals concessions
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22. DIAL PPP structuring - Bid Accurately
Name of bidder Management Development % Revenue Share
capability Capability
Reliance-ASA 74.8 81 45.99
GMR-Fraport 81.7 80.1 43.64
DS Construction- 73.3 70.5 40.15
Munich
Sterlite- 53.5 61.9 37.04
Macquarie-ADP
Essel-TAV 40.4 41.4 Bid not opened
GMR given the opportunity to match the highest bidder and won the bid
for Delhi airport
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23. DIAL PPP structuring - Bid Accurately
• Hybrid till Model: 30% of Non aeronautical revenues (terminal)
used to subsidize return expectations
• Aeronautical charges as per current rates; escalation as per
building block approach
Key considerations
• No pass through of revenue share to AAI
while bidding
• Land use for commercial property development limited to 5% of
total area (~250 acres)
• 30+30 year concession period
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24. DIAL PPP structuring - Financing the bid
Particulars US Bn. $
+ Project Cost 2.83
- Funding Means
Equity/internal accruals 0.55
CPD (commercial property Additional funding
development) deposits requirement after
(Refundable) subsidizing costs
0.33 through deposits
CPD Infra deposits
from CPD and
Commercial (concessions) Deposits concessions
Rupee term Loan 0.81
ECB 0.36
Total 2.05
GAP 0.77
Additional funding to be met
ADF (Tranche 1) 0.41
ADF (Tranche 2) 0.36
Tranche 2 is yet to be approved by
the regulator
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25. DIAL PPP structuring - Financing the bid
Particulars
+ Project Cost
- Funding Means
Equity/internal accruals
CPD (commercial property development)
deposits (Refundable)
CPD Infra deposits
Rupee term Loan
ECB
Commercial (concessions) Deposits
Total
GAP
• DIAL is currently charging INR 200 per domestic PAX and INR 1300 per international PAX, total
collections not to exceed ceiling of USD 0.41 Bn
• The receivables have been securitized to bridge the funding gap of USD 0.41 Bn
ADF is a levied under the provision of AAI Act on the departing passengers of the
respective airport. ADF is levied to fund/finance the cost of new airports
development.
This means of funding is unique to the Indian context.
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26. Key challenges faced in developing Terminal 3
Rework of masterplan within six months
Critical timelines – to complete terminal by Mar 2010
Complex engagement with large number of stakeholders
Project management
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27. DIAL Masterplan was revised within six months of takeover.
• Master Plan had to resubmitted within 6 months of signing concession agreement as per
• Actual site conditions (encroachments, city sewage, operational complex, etc)
• Increase in Passenger Traffic & deadline
• Master Plan was made with 20 year horizon and at Ultimate Capacity
Terminal T1D
Terminal T3
Runway 11/29
•As per the masterplan, DIAL has developed new facilities, T1D, T3 and Runway 11/29 by 27
2010

28. Key challenges during takeover by GMR from AAI
• Existing AAI Employees to be taken over
• Huge Cultural differences, Insecurity and hindrance to new
initiatives & any Change
Key challenges • Modernization had to take place simultaneously by taking over existing
during takeover airport operations in the domestic side as well as international side
• Deficiencies in IT backup process and Disaster Recovery/Business
Continuity Planning
• There were multiple number of more than 100 court cases that had to
True PPP Model handled with lot of co-ordination from AAI, MoCA, DDA, Railways
Ministry which were handled in a time bound plan
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29. Unique development strategy & mitigation of risks to meet timelines
• Key principles were kept in mind:
• Modular expansion to meet the incremental traffic growth
• To meet the OMDA requirements
Development • To meet the Traffic Forecast
strategy • To optimize land use
• To meet the ICAO and IATA recommendations
• To meet requirements of Statutory Agencies
• Comprehensive risk management measures in place
• Key risks were identified: 95, of which critical were: 35
• High End software (Pertmaster Risk Analyst V8) for Risk
Analysis
Risk • Detailed Risk Mitigation strategy (incl. EPC contractor)
management prepared for critical risks and monitored very closely for
mitigation
• Mitigation plans & strategies reviewed twice in a month
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30. In the end, T3 was completed on schedule.
Construction Period,
Airport Capacity, mppa Floor Area, sqm
months
London Heathrow 28 353,000 72
Madrid 42 757,000 70
Bangkok 45 563,000 60
Kuala Lumpur 25 479,000 54
Beijing 43 900,000 52
Delhi T3 34 502,000 37
•Source: Jacobs Benchmarking study, 2009
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31. Stakeholder support was key in delivering T3 on schedule
• Proactive participation among all stakeholders during design, construction and in
seamless transfer of operations to T3:
• The Government of India (GoI) supported DIAL at all levels:
– Ministry of Civil Aviation provided guidance and facilitated clearances
– Cabinet Secretary chaired National Facilitation Committee meetings to
expedite issues
• Regulatory agencies viz. Customs, Immigration, Central Industrial Security Force
• Fuel farm joint venture partners (Indian Oil & Bharat Petroleum)
• Airlines & ground handling agencies which participated in trials and gave
valuable feedback to streamline processes in the new terminal
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32. DIAL quality ratings have moved up by leaps and bounds
• 101th position in 2007 worldwide out of 101 participating airports
• 12th position in 2010 worldwide out of 154 participating airports
• 4th position in the category of 25-40 Million Passengers per annum out of
19 airports in 2010
• 9th position in Asia Pacific Region out of 35 airports in 2010
ASQ (Airport service quality) Trend
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33. Today, T3 is helping IGIA to emerge as an international hub for the region

34. Suggested readings
http://www.pppinindia.com/
My email
nambiar.madhavan@gmail.com
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35. Thank You
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