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BANGALORE INTERNATIONAL AIRPORT LIMITED
Multi-Year Tariff Proposal FY2011-12 to FY2015-16
and Business Plan FY2011-12 to FY2020-21:
Financial Statements and Assumptions
Till mechanism adopted for tariff determination: Dual till
Submitted to the Airport Economic Regulatory
Authority (AERA)
September 2011
Annexure II
CP No. 14/2013-14- MYTP & ATP- BIAL-CP Annexure II Page 1 of 381
MYTP - Financial statements and assumptions
Bangalore International Airport Limited (BIAL) Page 2 of 18
Table of contents
1 Approach and consideration ....................................................................... 4
1.1 Approach .......................................................................................... 4
1.2 Consideration and applicability................................................................ 4
2 Financial statements ................................................................................ 5
2.1 Financials Aggregated ......................................................................... 5
2.2 Financials Aero ................................................................................. 8
2.3 Financials Non-Aero ........................................................................... 9
2.4 Calculated Aggregate Revenue Requirements (ARR) ...................................... 10
3 Assumptions .......................................................................................... 11
3.1 Bifurcation of Aero and Non-Aero assets and costs ........................................ 11
3.2 Capex assumptions ............................................................................. 11
3.3 WPI and CPI ...................................................................................... 11
3.4 Fair Return of Return (FRoR) .................................................................. 12
3.5 Traffic ............................................................................................ 12
3.6 Service Quality parameters ................................................................... 12
3.6.1 Objective parameters .................................................................... 12
3.6.2 Subjective parameters ................................................................... 13
3.7 Revenue .......................................................................................... 13
3.7.1 Regulated charges ......................................................................... 13
3.7.2 Other charges Aviation concession and non-aviation revenues ................... 13
3.8 Operating cost .................................................................................. 13
3.8.1 Personnel Expense ........................................................................ 13
3.8.2 O&M Costs .................................................................................. 14
3.8.3 Concession fee ............................................................................. 14
3.8.4 Lease rent .................................................................................. 14
3.8.5 Utilities ..................................................................................... 14
3.8.6 Insurance ................................................................................... 14
3.8.7 Marketing, Advertising & Others ........................................................ 14
3.8.8 OMSA fee ................................................................................... 14
3.8.9 General Administration Costs............................................................ 14
3.9 Treatment of Real estate business ........................................................... 14
Annexure II
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Bangalore International Airport Limited (BIAL) Page 3 of 18
List of Annexure
Annexure 1: Auditor's certificate for bifurcation of fixed assets and costs ....................... 15
Annexure 2: Revised Master Plan ....................................................................... 16
Annexure 3: Traffic forecasts for Aviation Activity Forecasts by L&B ............................. 17
Annexure 4: Audited Financial Statements ............................................................ 18
Annexure II
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MYTP - Financial statements and assumptions
Bangalore International Airport Limited (BIAL) Page 4 of 18
1 Approach and consideration
1.1 Approach
The Bangalore International Airport Limited (BIAL) is governed by provisions of the provisions
of the Concession Agreement (C.A.) entered into between the Ministry of Civil Aviation,
Government of India and Bangalore International Airport Limited (BIAL) on 5th July 2004.The
details of the Business Plan of BIAL, as presented here, are based on the considerations
provided for in the C.A., Detailed Project Report and the related Project Financials, which
were duly acknowledged by the Government of Karnataka at the time of entering into the
State Support Agreement with BIAL.
In the Business Plan, the regulated charges include Landing Charges, Parking Charges,
Passenger Service Fee (PSF) and Users Development Fee (UDF). The rest of the revenues items
are classified as non-regulated charges such as Aviation Concessions, retail, commercial,
among others. Further, C.A. does not provide for any cross-subsidization of non-regulated
charges for determining the tariff of regulated charges. Therefore, the financial statements
and assumptions are developed taking this approach and the details of the formats, as
required under MYTP, are presented in this document.
1.2 Consideration and applicability
The enclosed financial statements are based on 10 years Business Plan that has been approved
by the BIALs Board. The Board has deliberated and considered the results for submission to
the AERA subject to the condition that any final scenario of tariff determination requiring
fresh equity infusion from the respective state promoters of BIAL would be subject to
approval of the Board and respective state governments.
Annexure II
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Bangalore International Airport Limited (BIAL) Page 5 of 18
2 Financial statements
2.1 Financials Aggregated
Table 2-1: Profit and Loss Account (INR million)
Note:
1. Results of FY1 2009-10 and FY2010-11 represents actual results while other years represents forecasted values
2. Expenses and losses are depicted with negative and shown in brackets
1 Financial Year (FY) refers to year starting from April 1 and ending on 31st March
Particulars 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Revenue
Revenues from Regulated Services 3,669 4,198 7,942 9,531 11,263 13,331 15,701 25,541 29,879 34,892 39,730 45,105
Revenues from other than Regulated Services 977 1,197 2,438 2,720 2,982 3,295 3,645 4,034 4,700 5,249 5,834 6,363
Operation and Maintenance expenditure
Personnel (583) (671) (897) (1,083) (1,414) (1,679) (2,211) (2,381) (3,294) (3,524) (3,771) (4,037)
Operations & Maintenance (297) (322) (405) (435) (702) (729) (1,192) (1,249) (2,421) (2,501) (2,582) (2,666)
Concession Fee (204) (231) (415) (490) (570) (665) (774) (1,183) (1,383) (1,606) (1,823) (2,059)
Lease Rent (64) (64) (63) (63) (63) (63) (118) (130) (134) (138) (142) (147)
Utilities (200) (211) (239) (246) (266) (273) (280) (300) (440) (440) (440) (452)
Insurance (28) (26) (36) (45) (46) (61) (65) (103) (107) (112) (115) (119)
Marketing, Advt. and others (59) (14) (152) (177) (203) (234) (269) (380) (439) (506) (569) (639)
OMSA Fee (110) (82) (185) (221) (243) (282) (313) (502) (553) (653) (750) (856)
General Administration Costs (132) (141) (726) (308) (339) (373) (410) (431) (453) (475) (497) (521)
Earnings before depreciation, interest and taxation (EBDIT) 2,968 3,634 7,261 9,184 10,399 12,267 13,714 22,916 25,354 30,188 34,874 39,973
Depreciation and Amortisation (1,338) (1,347) (1,440) (1,863) (2,239) (2,821) (3,639) (5,465) (7,103) (6,685) (6,816) (6,988)
Earnings before interest and taxation (EBIT) 1,630 2,288 5,821 7,321 8,160 9,446 10,075 17,451 18,251 23,503 28,058 32,985
Total interest and finance charges (1,035) (1,263) (1,368) (1,379) (3,261) (2,867) (2,474) (8,680) (7,839) (11,218) (10,447) (10,919)
Profit/loss before tax 596 1,024 4,453 5,942 4,899 6,579 7,601 8,770 10,412 12,285 17,611 22,066
Other income 187 301 95 108 79 163 125 30 101 67 323 586
Provision for taxation (5) (4) (910) (1,210) (996) (1,348) (1,545) (1,760) (2,103) (2,470) (3,587) (4,530)
Profit /(loss) after taxation 777 1,321 3,638 4,840 3,983 5,393 6,181 7,040 8,411 9,881 14,348 18,122
Balance Carried to Balance Sheet 777 1,321 3,638 4,840 3,983 5,393 6,181 7,040 8,411 9,881 14,348 18,122
Actuals Forecasts
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Bangalore International Airport Limited (BIAL) Page 6 of 18
Table 2-2: Balance Sheet (INR million)
Particulars 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
A)Shareholders' Funds
Capital 3,846 3,846 3,846 3,846 3,846 3,846 3,846 3,846 3,846 3,846 3,846 3,846
Total Shareholders' Funds 3,846 3,846 3,846 3,846 3,846 3,846 3,846 3,846 3,846 3,846 3,846 3,846
B)Reserves & Surplus
Profit & Loss Account Brought Forward (1,511) (733) 588 4,226 9,066 13,049 18,442 24,623 31,663 40,074 49,955 64,303
Profit & Loss Account for the Period 777 1,321 3,638 4,840 3,983 5,393 6,181 7,040 8,411 9,881 14,348 18,122
Total Profit & Loss Account (733) 588 4,226 9,066 13,049 18,442 24,623 31,663 40,074 49,955 64,303 82,424
C)Loan Funds
Secured Loans (incl. ECB Restatement) 13,816 12,857 16,751 25,971 36,662 53,029 65,873 87,278 84,489 83,350 79,270 74,868
Unsecured Loan - SS 3,335 3,335 3,335 3,335 3,335 3,335 3,335 3,335 3,335 3,002 2,668 2,335
D)Working capital borrowings - - - - - - - - - 356 994 1,692
TOTAL SOURCES OF FUNDS 20,264 20,626 28,158 42,218 56,891 78,652 97,678 126,122 131,744 140,508 151,081 165,165
A) Fixed Assets
Gross Block 19,744 19,874 22,282 38,348 40,060 69,940 75,151 148,923 152,401 157,583 159,824 162,448
less: Accumulated Depreciation (2,485) (3,832) (5,271) (7,134) (9,373) (12,194) (15,834) (21,299) (28,401) (35,086) (41,902) (48,890)
Net Block 17,259 16,042 17,010 31,214 30,687 57,746 59,317 127,624 124,000 122,497 117,922 113,558
Capital Work in Progress 135 880 8,451 6,685 23,385 22,424 39,517 - - - - -
Current Assets, Loans and Advances
Inventories 121 138 79 42 75 78 138 148 296 303 313 318
Sundry Debtors 461 985 1,046 1,081 1,259 1,469 1,710 2,666 3,117 3,619 4,104 4,634
Other Current Assets , Loans and Advances and others 1,226 1,343 1,343 1,343 1,343 1,343 1,343 1,343 1,343 1,343 1,343 1,343
Total Current Assets, Loans and Advances 1,808 2,466 2,468 2,466 2,676 2,890 3,190 4,157 4,756 5,264 5,760 6,294
DSRA Reserves - - 567 562 994 962 927 2,229 2,192 2,479 2,402 2,613
Cash and Bank Balances 3,798 4,315 3,168 6,519 5,003 1,182 4,060 2,670 12,929 23,438 37,820 55,194
Less : Current Liabilities and Provisions
Current Liabilities and Provisions 2,735 3,077 3,506 5,228 5,853 6,551 9,334 10,559 12,132 13,170 12,823 12,495
Net Current Assets 2,870 3,704 2,697 4,319 2,820 (1,518) (1,157) (1,502) 7,744 18,011 33,159 51,607
TOTAL APPLICATION OF FUNDS 20,264 20,626 28,158 42,218 56,891 78,652 97,678 126,122 131,744 140,508 151,081 165,165
SOURCES OF FUNDS
APPLICATION OF FUNDS
Actuals Forecasts
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Table 2-3: Cash Flow Statement (INR million)
Particulars 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Cashflow from operating activities
Net Profit before taxation 777 1,321 3,638 4,840 3,983 5,393 6,181 7,040 8,411 9,881 14,348 18,122
Adjustment for :
Depreciation and Amortisation 1,338 1,347 1,440 1,863 2,239 2,821 3,639 5,465 7,103 6,685 6,816 6,988
Operating Profit before working capital changes 2,115 2,668 5,078 6,703 6,222 8,214 9,820 12,505 15,514 16,566 21,164 25,110
Adjustment for :
(Increase)/ Decrease in Inventories, Debtors and Other Current Assets 324 (658) (3) 2 (210) (214) (301) (967) (599) (508) (496) (535)
Increase/ (Decrease) in Current Liabilities and Provisions 212 341 429 1,721 626 697 2,783 1,224 1,573 1,038 (347) (328)
(Increase)/Decrease in DSRA Reserves - - (567) 4 (431) 32 35 (1,302) 37 (287) 77 (211)
Increase/(Decrease) in Work ing Capital loans - - - - - - - - - 356 638 698
Net Work ing capital changes 536 (317) (140) 1,728 (16) 516 2,517 (1,044) 1,012 598 (127) (376)
Cash generated from Operation 2,651 2,351 4,938 8,431 6,206 8,730 12,338 11,461 16,525 17,164 21,037 24,733
Cash flow from investing activities
Purchase of Fixed Assets (236) (875) (9,979) (14,301) (18,412) (28,919) (22,304) (34,255) (3,478) (5,182) (2,241) (2,624)
Net Cash from/ (used in) Investing Activities (236) (875) (9,979) (14,301) (18,412) (28,919) (22,304) (34,255) (3,478) (5,182) (2,241) (2,624)
Cashflow from financing activities
Proceeds from LT Debt incl. Loss on restatement/Fin Lease (304) (959) 3,893 9,220 10,690 16,367 12,845 21,404 (2,789) (1,139) (4,080) (4,402)
Proceeds from State Financial Support 30 - - - - - - - - (334) (334) (334)
Net Cash from/ (used in) Financing Activities (274) (959) 3,893 9,220 10,690 16,367 12,845 21,404 (2,789) (1,472) (4,414) (4,735)
Net change in cash and cash equivalents 2,141 518 (1,147) 3,351 (1,515) (3,822) 2,878 (1,390) 10,258 10,510 14,382 17,374
Cash and Cash equivalents at the beginning of the period 1,657 3,798 4,315 3,168 6,519 5,003 1,182 4,060 2,670 12,929 23,438 37,820
Cash and cash equivalents at the end of the period 3,798 4,315 3,168 6,519 5,003 1,182 4,060 2,670 12,929 23,438 37,820 55,194
Actuals Forecasts
Annexure II
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MYTP - Financial statements and assumptions
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2.2 Financials Aero
Table 2-4: Profit and Loss Account (INR million)
Particulars 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Revenue
Aero revenues 3,669 4,198 7,942 9,531 11,263 13,331 15,701 25,541 29,879 34,892 39,730 45,105
Operation and maintenance expenditure
Personnel (467) (538) (720) (868) (1,134) (1,346) (1,773) (1,909) (2,642) (2,826) (3,024) (3,238)
Operations & Maintenance (252) (274) (322) (332) (551) (573) (1,031) (1,083) (2,101) (2,170) (2,240) (2,313)
Concession Fee (147) (168) (318) (381) (451) (533) (628) (1,022) (1,195) (1,396) (1,589) (1,804)
Lease Rent (49) (49) (49) (49) (49) (49) (90) (100) (103) (106) (109) (113)
Utilities (150) (158) (179) (184) (199) (205) (210) (225) (330) (330) (330) (339)
Insurance (21) (20) (27) (33) (34) (46) (49) (77) (80) (84) (86) (89)
Marketing, Advt.,and others (50) (12) (120) (141) (164) (191) (221) (327) (378) (437) (494) (556)
OMSA Fee (110) (82) (148) (178) (198) (233) (260) (442) (488) (579) (666) (763)
General Administration Costs (112) (120) (618) (262) (288) (317) (349) (367) (385) (403) (422) (443)
Earnings before depreciation, interest and taxation (EBDIT) 2,309 2,779 5,441 7,101 8,195 9,839 11,091 19,990 22,177 26,561 30,768 35,447
Depreciation and Amortisation (1,070) (1,077) (1,147) (1,512) (1,813) (2,295) (3,237) (4,871) (6,242) (5,875) (5,993) (6,142)
Earnings before interest and taxation (EBIT) 1,239 1,702 4,294 5,589 6,382 7,544 7,854 15,119 15,935 20,686 24,774 29,304
Total interest and finance charges (828) (1,011) (1,152) (1,083) (2,780) (2,282) (1,843) (7,988) (6,234) (9,521) (8,795) (9,351)
Profit/loss before tax 411 691 3,143 4,506 3,602 5,262 6,010 7,131 9,700 11,165 15,979 19,953
Other income - - 76 86 63 130 100 24 81 53 259 469
Provision for taxation (5) (4) (644) (919) (733) (1,078) (1,222) (1,431) (1,956) (2,244) (3,248) (4,084)
Profit /(loss) after taxation 406 687 2,575 3,674 2,932 4,314 4,888 5,724 7,825 8,975 12,990 16,338
Balance Carried to Balance Sheet 406 687 2,575 3,674 2,932 4,314 4,888 5,724 7,825 8,975 12,990 16,338
Actuals Forecast
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MYTP - Financial statements and assumptions
Bangalore International Airport Limited (BIAL) Page 9 of 18
2.3 Financials Non-Aero
Table 2-5: Profit and Loss Account (INR million)
Particulars 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Revenue
Non Aero revenues 977 1,197 2,438 2,720 2,982 3,295 3,645 4,034 4,700 5,249 5,834 6,363
Operation and Maintenance expenditure
Personnel (115) (133) (178) (214) (280) (333) (438) (472) (653) (698) (747) (800)
Operations & Maintenance (45) (48) (82) (103) (151) (156) (161) (166) (320) (331) (342) (353)
Concession Fee (58) (64) (98) (109) (119) (132) (146) (161) (188) (210) (233) (255)
Lease Rent (15) (15) (15) (15) (15) (15) (27) (30) (31) (32) (33) (34)
Utilities (50) (53) (60) (61) (66) (68) (70) (75) (110) (110) (110) (113)
Insurance (7) (7) (9) (11) (11) (15) (16) (26) (27) (28) (29) (30)
Marketing, Advt.,and others (9) (2) (32) (35) (39) (43) (48) (53) (61) (68) (75) (82)
OMSA Fee - - (37) (42) (45) (50) (54) (60) (65) (74) (84) (92)
General Administration Costs (20) (21) (109) (46) (51) (56) (62) (65) (68) (71) (75) (78)
Earnings before depreciation, interest and taxation (EBDIT) 659 855 1,819 2,082 2,204 2,428 2,624 2,926 3,177 3,627 4,107 4,527
Depreciation and Amortisation (268) (269) (293) (350) (426) (526) (402) (594) (861) (810) (823) (846)
Earnings before interest and taxation (EBIT) 392 586 1,527 1,732 1,778 1,902 2,222 2,332 2,317 2,817 3,284 3,681
Total interest and finance charges (207) (253) (216) (296) (481) (585) (630) (693) (1,605) (1,697) (1,652) (1,568)
Profit/loss before tax 185 333 1,310 1,436 1,297 1,317 1,591 1,639 712 1,120 1,632 2,113
Other income 187 301 19 22 16 33 25 6 20 13 65 117
Provision for taxation - - (266) (291) (263) (270) (323) (329) (146) (227) (339) (446)
Profit /(loss) after taxation 371 634 1,063 1,166 1,050 1,079 1,293 1,316 586 906 1,357 1,784
Balance Carried to Balance Sheet 371 634 1,063 1,166 1,050 1,079 1,293 1,316 586 906 1,357 1,784
ForecastActuals
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2.4 Calculated Aggregate Revenue Requirements (ARR)
The ARR for the first Control Period is calculated as under:
Table 2-6: Calculation of ARR (INR million)
Aggregate Revenue Requirement Tariff Year 1 Tariff Year 2 Tariff Year 3 Tariff year 4 Tariff year 5
2011-12 2012-13 2013-14 2014-15 2015-16
Aggregate Revenue Requirement 11,196 7,509 9,045 12,506 16,989
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3 Assumptions
3.1 Bifurcation of Aero and Non-Aero assets and costs
The bifurcation of historical values of fixed assets and costs in Aero and Non-Aero is based on
the Auditors certificate issued after conducting agreed upon procedures. A copy of the
certificate is attached in Annexure 1. On the same basis, the projected fixed assets and costs
are bifurcated to estimate the future Aero and Non-Aero Assets.
The Aeronautical Assets, Non-Aeronautical Assets, Aeronautical Services and Non-Aeronautical
Services are as defined under Clause 1.1 and Clause 1.2 of the Annexure 1.
3.2 Capex assumptions
Historical fixed assets have been taken as per the books of accounts and records.
The RAB is based on capital expenditure estimates as per the Revised Master Plan.
Further details are provided under Annexure 2.
Depreciation has been considered as per the rates prescribed in the Companies Act,
1956. The financial statements have been prepared following Straight Line Method
(SLM) of depreciation.
The capital expenditure has been indexed based on Whole Price Index (WPI) of 2.7% on
year on year basis.
3.3 WPI and CPI
The WPI figures are derived based on the forecasted Producer Price Index (PPI) values
as provided by analysts projections.
The forecasted Consumer Price Index (CPI) values for the Control Period are
considered on the basis of analysts projections.
The forecasted values for the first Control Period are shown in table below:
Year WPI PPI CPI
2011-12 7.7% 7.2% 6.8%
2012-13 7.6% 7.1% 6.5%
2013-14 6.2% 5.6% 6.0%
2014-15 6.0% 5.4% 5.7%
2015-16 5.8% 5.2% 5.5%
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3.4 Fair Rate of Return (FRoR)
The post-tax Cost of Equity (Ke) is calculated using the Capital Assets Pricing Model (CAPM)
method. Based on the internal estimates, the value of Ke is 24.4% for the first Control Period.
This is based on an average Debt/Equity (D/E) of 1.5 over the period FY2011-12 to FY 2015-
16. To arrive at this figure, risk free rate is assumed as 7.91% and the equity risk premium is
10.36%. The value of asset beta is taken as 0.8.
The Cost of Debt has been considered on the basis of expected borrowing cost for each of the
projected years of the first Control Period. The respective Cost of Debt values for each year
of the Control Period ranges from 12.5% to 13.5%.
The weighted average gearing for the first Control Period is calculated based on the projected
values of debt and equity.
3.5 Traffic
The traffic forecasts used in the financial statements are based on the report submitted by
M/s Landrum and Brown (L&B) in August 2010. The report provides annual forecasts of
passenger traffic, air cargo tonnage, and aircraft movements for the twenty year period of
2009-10 to 2029-30. The report presented growth under various scenarios; Master Planning
Traffic Forecast is taken as most likely scenario and included in the financial forecasts. The
report is attached as Annexure 3 for reference purpose.
The report was prepared considering base year of 2009-10. For projecting the aviation activity
at the airport, the estimated traffic figures of the 2009-10 and 2010-11 have been replaced by
the actual traffic figures of 2009-10 and 2010-11 respectively. Thereafter, the base traffic
numbers are increased at the rates estimated in the L&B report taking base of 2010-11.
Other key assumptions for traffic estimates are as under:
Traffic band percentage is assumed to be 5%.
Domestic arrival to departure ratio is assumed at 50:50 for the first Control Period. In
case of international passengers, the arrival to departure ratio is 52:48 for the first
Control Period.
3.6 Service Quality parameters
3.6.1 Objective parameters
The key points regarding this parameter are mentioned in the Form 14 (a) of MYTP.
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3.6.2 Subjective parameters
Subjective quality parameters shall be attained as per C.A. Detailed are presented in Form 14 (b) of MYTP.
3.7 Revenue 3.7.1 Regulated charges
The regulated revenues are increasing at a Compounded Annual Growth Rate (CAGR) of 18.58% over the first Control Period.
Landing charges: The landing charges for domestic and international aircrafts are
assumed at the rates prevailing in FY 2010-11 growing as per the growth rate of WPI
starting FY 2011-12 over the balance period of the first Control Period. The rise in the
landing revenues over the first Control Period is represented by a CAGR of 18.57%.
PSF (FC): Overall, the passenger service fee is assumed to grow at a CAGR of 18.57% in
the first Control Period.
UDF: The total revenue from UDF is expected to grow at a CAGR of 19.08% during the
first Control Period.
Parking charges: The parking revenue grows at a CAGR of 16.68% in the first Control
Period.
ATR2: INR 4,000 per landing per ATM has been considered.
3.7.2 Other charges Aviation concession and non-aviation revenues
The aviation concession revenues and non-aviation revenues are increasing at a CAGR of
10.56% and 10.58% respectively during the first Control Period.
The revenues for the aviation concessions and non-aviation revenues-other charges are as per the existing agreements with the concessionaires. The revenues from aerobridge charges, cargo, fuel farm, flight catering and ground handling activities are classified under Aviation Concessions. Non-Aero revenues include retail, food and beverages, taxi etc.
3.8 Operating cost The total operating expenses are increasing at a CAGR of 15.91% over the first Control Period. 3.8.1 Personnel Expense
The personnel cost is increasing by a CAGR of 25.29% in the first Control period. During this
period, the headcount is expected to rise by a CAGR of 11.76%. This increase is primarily on
account of existing and future expansion.
2 Aircrafts with seating capacity of less than 80 seats
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3.8.2 O&M Costs
During the first control period, the total O&M costs increase by CAGR of 31.01%. Maximum
increase is expected in the FY 2013-14 due to the existing and future expansion requirements
as captured in the Revised Master Plan.
3.8.3 Concession fee
The concession fee has been estimated at 4% of gross revenues. The Concession fee rises by a
CAGR of 16.84% over the first Control Period.
As per the Concession Agreement of BIAL, the concession fee for first 10 financial years from
the date of airport opening date (AOD) shall be payable in twenty equal half yearly
installments. The first such payment is due and payable in the 11th financial year from AOD.
3.8.4 Lease rent
Based on the Land Lease Deed with Karnataka State Industrial and Investment Development
Corporation (KSIIDC - Lessor), the total annual lease rent payable has been considered. The
CAGR for first Control Period is 16.71%.
3.8.5 Utilities
The utilities cost is increasing at a CAGR of 4.01%. The cost mainly comprises of power and
water.
3.8.6 Insurance
The total insurance premium cost is growing by CAGR of 15.77% for the first Control Period.
3.8.7 Marketing, Advertising & Others
The marketing and advertising costs are increasing by a CAGR of 11.82% during the first
Control Period.
3.8.8 OMSA fee
The component increases by a 14.03% in the first Control Period.
3.8.9 General Administration Costs
This cost head includes consultancy& legal, travel, office and others.
3.9 Treatment of Real estate business
The business plan for real estate has not yet been finalized and no investment has been made
as on date. Hence, the real estate business scenario has not been considered.
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Annexure 1: Auditor's certificate for bifurcation of fixed assets and costs
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Annexure 2: Revised Master Plan
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Annexure 3: Traffic forecasts for Aviation Activity Forecasts by L&B
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Annexure 4: Audited Financial Statements
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Revised Multi-Year Tariff Proposal FY 2011-12 to FY
2015-16
and
Business Plan FY 2011-12 to FY 2020 -21: Financial
Statements and Assumptions
Till type adopted for tariff determination: Dual till
Submitted to the Airport Economic Regulatory
Authority (AERA)
November 2012
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Table of contents
1 Background and Introduction to Bangalore International Airport Limited ................ 6
2 Our Approach to MYTP re-submission ............................................................ 8
3 Assumptions and drivers used for various Regulatory Building Blocks ..................... 9
3.1 Project Cost, Regulatory Asset Base and Means of Financing ............................. 9
3.2 Means of Financing ............................................................................. 17
3.3 Cost of Debt ..................................................................................... 18
3.4 Cost of Equity ................................................................................... 20
3.5 Fair Rate of Return ............................................................................. 20
3.6 Depreciation ..................................................................................... 21
3.7 Traffic ............................................................................................ 23
3.8 Non-Aero Revenues ............................................................................. 23
3.9 Operating Costs ................................................................................. 23
3.9.1 Personnel Costs ............................................................................ 23
3.9.2 Operations and Maintenance Costs ..................................................... 25
3.9.3 Utility Costs ................................................................................ 35
3.9.4 Operation Maintenance and Support Fee .............................................. 36
3.9.5 Concession Fee ............................................................................ 37
3.9.6 Lease Rent ................................................................................. 37
3.9.7 General Administration Costs............................................................ 38
3.9.8 Insurance ................................................................................... 39
3.9.9 Marketing, advertising and others ...................................................... 39
3.10 Taxation .......................................................................................... 39
3.11 Pre-Control Period Shortfall for reimbursement ........................................... 40
3.12 WPI and CPI ...................................................................................... 42
3.13 Audit of Financial Model ....................................................................... 43
4 Financial statements ............................................................................... 44
4.1 Financials - Aggregated ........................................................................ 44
4.2 Calculated Aggregate Revenue Requirements (ARR) ...................................... 48
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List of Annexures
Annexure 1: Cost of Equity report by KPMG
Annexure 2: Audited Financial Statements 2011-12
Annexure 3 Financial Model audit report
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Glossary of Terms used:
AAI Airport Authority of India
AERA Airport Economic Regulatory Authority
AFL Air Field Lighting
AMC Annual Maintenance Contract
AOD Airport Opening Date
AOCC Airport Operation Control Centre
ARFF Airfield Rescue Fire Fighting
ATC Air Traffic Control
BIAL Bangalore International Airport Limited
BOT Build Operate Transfer
BHS Baggage Handling System
BRS Baggage Reconciliation System
CA Concession Agreement
CCTV Closed Circuit Television
CUTE Common User Terminal Equipment
CPI Consumer Price Index
CUSS Common User Self Service
CPS Central Parking Services
DG Diesel Generator
DSCR Debt Service Coverage Ration
DSRA Debt Service Reserve Account
E&E Elevators & Escalators
EPC Engineering Procurement and Construction
ECB External Commercial Borrowing
FF Fire Fighting
FOD Foreign Object Debris
FAS Fire Alarm System
FROR Fair Rate of Return
GOK Government of Karnataka
HVAC Heating Ventilation and Air Conditioning
IATA International Air Transport Association
ICT Information Communication Technology
IT Information Technology
ITES Information Technology Enabled Services
KSIIDC Karnataka State Industrial and Infrastructure Development Corporation
KSPCB Karnataka State Pollution Control Board
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LT Light Tension
MCR Microprocessor Constant Current Regulator
MOCA Ministry of Civil Aviation
MoEF Ministry of Environment and Forest
MOU Memorandum of Understanding
MTBF Mean Time between Failure
MYTP Multi Year Tariff Proposal
NAR Non Aero Revenue
NSPR New South Parallel Runway
OFC Optical Fibre Cable
OMSA Operation Management Service Agreement
PAPI Precision Approach Path Indicator
PBB Passenger Boarding Bridge
PIDS Perimeter Intrusion detection system
PLC Programme Logic Controllers
PPI Producer Price Index
PPP Public Private Partnership
PSF Passenger Service Fee
RAB Regulatory Asset Base
RBB Regulatory Building Block
RET Rapid Exit Taxiways
SCADA Supervisory Control and Data Acquisition
SITA Socit Internationale de Tlcommunications Aronautiques
SSA State Support Agreement
STP Sewage Treatment Plant
TRA Trust & Retention Account
T1 Terminal 1
T2 Terminal 2
TMRS Trunk Mobile Radio System
UDF User Development Fee
UPS Uninterrupted Power Supply
WPI Wholesale Price Index
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1 Background and Introduction to Bangalore International Airport
Limited
The Airport Authority of India Act, 1994 was amended by the amendment Act 43 of 2003
with an object to encourage private participation and investment in Greenfield Airports by
providing managerial and financial independence and by lifting various restrictions. The
Government of India recognized the need to improve the standard of service and facilities
at the airports, and realized that the most effective way of improving services would be
to develop and/or build new airports in association with private investors.
Bangalore International Airport is Indias first privatized Greenfield airport. Bangalore
International Airport Limited (BIAL) is a Limited Company incorporated under the
provisions of the Companies Act, 1956. The main objects are to operate, maintain,
develop, design, construct, upgrade, modernize and manage airport at Bangalore.
The project is based on the Public Private Partnership (PPP) model and is structured on a
Build, Operate and Transfer (BOT) basis. The airport was commissioned on 24th May 2008
with initial capacity of 11.4 million passengers per annum (MPPA) and 3,50,000 tons of
cargo handling capacity per annum.
A Memorandum of Understanding (MoU) was signed during May 1999 between Government
of Karnataka (through KSIIDC) and Union of India (through AAI) and in principle approval
granted to Bangalore International Airport by MoCA. During June 1999, KSIIDC published
Invitation for Expression of Interest (EoI) through international competitive bidding for
Joint Venture Partners wherein 26% would be held by KSIIDC and AAI and the remaining
74% by JVPs and a steering committee was constituted for evaluation of EoI.
Subsequent to the above, various Project Agreements, as detailed below were executed:
Shareholders Agreement was signed between Bangalore International Airport Limited,
KSIIDC, AAI, Siemens Project Ventures GmbH, Larsen & Toubro and Flughafen Zrich
AG on 23rd January 2002.
Concession Agreement between Ministry of Civil Aviation and BIAL was signed on 5th
July 2004.
State Support Agreement between Government of Karnataka and BIAL was signed on
20th January 2005.
Land Lease Deed between KSIIDC and BIAL was executed on 30th April 2005
Financial closure was achieved during June 2005.
Operations & Management Services Agreement (OMSA) between Flughafen Zurich AG
(Unique) and BIAL was executed on 08th April 2005.
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Initial Shareholding pattern at the time of commencement of Airport and the present
shareholding pattern, is detailed as under:
Shareholder Initial share-
holding (%)
Present share-
holding (%)
Private Promoters:
1. Siemens Project Ventures GmbH 40% 26%
2. Flughafen Zurich AG Ltd.
17% 5%
3. L&T IDPL 17% Nil
4. GVK Group Nil 43%
Sub-Total 74% 74%
State Promoters:
1. Airport Authority of India (GoI) 13% 13%
2. Karnataka State Industrial Investment &
Development Corporation Limited (GoK)
13%
13%
Sub-Total 26% 26%
TOTAL 100% 100%
Extracts from Concession Agreement:
A Concession Agreement for development, construction, operation and maintenance of
the Bangalore International Airport was entered into between Ministry of Civil Aviation,
Government of India and Bangalore International Airport Limited (BIAL) on 5th July 2004.
Schedule 6 (Regulated Charges) of the Concession Agreement detailed the charges that
can be levied as below:
(i) Landing, Housing and Parking charges (Domestic and International):
The charges to be adopted by BIAL at the time of airport opening will be higher of:
(a) The AAI tariff effective 2001 duly increased with WPI inflation index as set out
up to the airport opening date, or
(b) The then prevailing tariff at the other AAI airports.
(ii) Passenger Service Fee (Domestic and International):
The charges to be adopted by BIAL at the time of airport opening will be higher of:
(a) The AAI tariff effective 2001 duly increased with WPI inflation index as set out
up to the airport opening date, or
(b) The then prevailing Passenger Service Fee at the other AAI airports.
(iii) User Development Fee(UDF) (Domestic and International):
BIAL will be allowed to levy UDF, w.e.f. Airport Opening Date, duly increased in the
subsequent years with inflation index as set out hereunder, from embarking
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domestic and international passengers, for the provision of passenger amenities,
services and facilities and the UDF will be used for the development, management,
maintenance, operation and expansion of the facilities at the Airport.
Based on the provisions in the Concession Agreement, BIAL had made various submissions
to MoCA in connection with approval of levy of UDF with valid justification for charging
Rs. 675/- for domestic departing passengers and Rs. 955/- for international departing
passengers (excluding applicable taxes) from Airport opening Date (AoD). Based on the
discussions with Ministry of Civil Aviation (MoCA), the proposal for charging of UDF @
Rs.1070/- (incl. of applicable taxes) per international departing passengers w.e.f. AoD
(i.e., 24th May 2008) was approved by MoCA on ad-hoc basis (ref:
F.No.AV.20015/003/2003-AAI dated 3rd April 2008).
Further, BIAL had made several submissions to MoCA in connection with the levy of UDF on
domestic passengers. Based on the submissions, MoCA permitted to levy a UDF of Rs.
260/-(incl. of applicable taxes) per departing domestic passenger, with effect from 16th
Jan 2009 on ad-hoc basis (ref: F. No. AV.20036/007/2008-AD dated 9th January 2009).
2 Our Approach to MYTP re-submission
This document presents Multi-Year Tariff Proposal (MYTP) for first Control Period starting
from FY1 2011-12 to FY 2015-16 for tariff determination and key results from Business Plan
from FY 2011-12 to FY 2020-21.
As detailed above, the operations and business of BIAL is governed by the terms and
conditions of the Concession Agreement (C.A.) entered into between the Ministry of Civil
Aviation (Government of India) and Bangalore International Airport Limited (BIAL) on 5th July
2004 and related project agreements. In accordance with the C.A., the regulated charges
include landing charges, parking charges, housing charges, passenger service fee (PSF) and
user development fee (UDF). The rest of the revenue items such as Aviation Concessions,
retail, commercial are classified as non-regulated charges, among others.
Further, C.A. does not provide for any cross-subsidization of non-regulated charges for
determining the tariff of regulated charges. Therefore, the financial statements and
assumptions are developed taking this approach and the details of the formats, as required
under MYTP, are presented in this document.
Considering the provisions of C.A. and the requirements of Direction 5, the financial
statements are prepared and enclosed herewith.
BIAL submitted the Multi Year Tariff Proposal in September 2011. Consequent to the
submission, traffic scenarios and projections have undergone a significant change, with the
actual traffic for 2011-12 and Projections for 2012-13 reflecting a de-growth in traffic. In view
of this, projections required review and revision with respect to the Capital Expenditure
1 Financial Year (FY) refers to year starting from 1st April and ending on 31st March
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Plans, Means of Financing the Capital Expenditure and consequent changes in other
Regulatory Building Blocks (RBB). BIAL has carried out an assessment of these and the revised
MYTP is submitted herewith.
3 Assumptions and drivers used for various Regulatory Building Blocks
3.1 Project Cost, Regulatory Asset Base and Means of Financing
Initial Project Cost
BIAL commenced operations in May 2008. An initial Project cost of Rs. 1938 Crores relating to
the airport commissioned was capitalized on this date. Assets subsequently bought/
commissioned have been capitalized in the respective dates in the books. As at the start of
control period (1st April 2011) the Net book value of Fixed Assets was Rs.1595.7 crores. Work
in Progress carried in books as of 1st April 2011 of Rs. 97.3 Crores consists of costs incurred
towards various Maintenance Capex activities and Apron Extension which was planned as a
part of Phase 1 Project.
Of the above the WDV of assets relating to Aero business was Rs. 1300.7 Crores which has
been considered as opening Regulatory Asset Base (RAB) as prescribed in Direction 5.
Apron extension - This involves construction of parking stands for aircrafts on the
western side of the airfield, in addition to the 42 Code E stands constructed earlier. These
additional stands are being built to meet the increase in demand for night parking stands at
BIA.
The demand for overnight parking is expected to grow to 38 stands for 42 aircraft by end of
2012 as the economic situation improves. This translates to a total demand for 65 apron
stands including overnight parking, operations, diversions and contingency, as given below.
Particulars Total Stands
Current demand from Indian Carriers for overnight parking 32
Medium term demand for overnight parking 10
Current demand for international operation 13
Future demand for international operation 6
Requirement of non-scheduled, VIP, delay/diversion, technical grounding
etc. 2
Requirement of emergency operation 2
Total estimated demand 65
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In May 2010, BIAL had entered into a contract for construction of the additional stands. The
total investment estimated for the apron extension and related works is Rs.120 Crores. The
construction is proposed to be completed in phases by Q4 2012-13.
Out of the additional 24 Code C/10 Code E stands in the West Apron, 05 temporary stands
were operationalized on 30th Sept 2011 and 4 stands operationalized on 31st March 2012. The
remaining stands are likely to be handed over by Q4 2012-13.
Projects proposed to be executed
Basis
The company has also estimated the various Capital Expenditure Projects that need to be
executed to keep pace with the growth in Passenger, Cargo and ATM estimates, during the
first control period and has projected the costs to be incurred in line with the timing of the
Capital Expenditure. Airport development activities are projected based on the Jacobs
Consultancys Master Plan Update report dated August 2011, submitted earlier, which sets out
the vision for BIAL for the next 20 years and the strategy to translate the vision into facilities
development, necessitated based on the changes in demand, Economy and the aviation
Industry.
Methodology
The capital expenditure has been indexed based on Whole Price Index (WPI) of 2.7% on a year
on year basis. Financing Allowance as prescribed in Direction 5, at the cost of debt for the
year, has been estimated and considered for capitalization.
Depreciation has been computed on assets based on the defined depreciation rates. Average
RAB has been computed in line with the guidelines, for computing return on the same at Fair
Rate of Return (FRoR)
Overview of various Projects proposed
A brief overview of different Projects proposed to be executed during the first control period
is detailed below:
1. Terminal 1 (T1) expansion - Bangalore has experienced rapid growth in passenger volumes,
and will continue to realize significant growth over the 20-year planning period. In
2011/12, 12.7 million passengers (mppa) traveled through Bangalore, versus 1.8 million
annual passengers in 1995/96. The year-on-year growth for 2010 to 2011 represents an
annual growth rate of 9%, and CAGR of 14% per year for the past 15 years. International
traffic has been the fastest growing segment, increasing from a reported 1.2 percent of
total passengers in 1995/96 to nearly 20 percent currently. Growth has been particularly
robust since 2002/03, coinciding with ongoing deregulation of civil aviation in India, as
illustrated in Figure 1.1 below.
FIGURE 1.1
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The expansion of the existing Terminal 1 has been designed to enhance the operational
performance in order to handle, inter-alia, the increase of passenger traffic from the
current 12.7 million passengers in 2011-12 upto approximately 17 20 million passengers
per annum, until the second terminal (T2) is planned to be operational.
BIAL commenced the next phase of development, which is the substantial expansion of
the existing T1. This expansion will cater to the expected growth of passengers, until the
second Terminal (T2) is planned to be operational, as illustrated in Figure 1.2. This is
based on the current projected forecast demand for the next 4 to 5 year period, which is
the estimated time period for planning, design and construction of the new T2.
FIGURE 1.2 Source: Landrum & Brown Traffic Report dated August 2010
-
2
4
6
8
10
12
14
19
95/9
6
19
96/9
7
19
97/9
8
19
98/9
9
19
99/0
0
20
00/0
1
20
01/0
2
20
02/0
3
20
03/0
4
20
04/0
5
20
05/0
6
20
06/0
7
20
07/0
8
20
08/0
9
20
09/1
0
20
10/1
1
20
11/1
2
International
Domestic
Pas
sen
gers
in m
io
Fiscal year
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The terminal expansion program includes an extension by three grids (72m x 24m) on the east
and west sides of T1, East pier concourse, modifications to the existing T1, airside apron
expansion, ancillary facilities, and T1 kerb side and forecourt modifications.
The area of T1 is 73,627 sqm including the basement area, and is designed for IATA Level of
Service C. The existing layout provides a more or less balanced capacity for the domestic and
international processors of the different flows throughout the terminal building.
The design standards proposed would reflect the best industry practices and operating
standards. The facilities provided would also meet all relevant IATA standards. The total floor
area is planned to increase to approximately 150,556 sqm. Additional 7 Code C / 3 Code E and
1 Code F contact positions will be added improving the efficiency and level of service by
adding an East Pier to T1.
The Terminal 1 expansion Program includes minor improvements to the existing terminal
building, utility buildings and other related improvements to add capacity to meet the
forecasted demand. As there is a desire to expand the capacity of the overall operation
including airside, landside and terminal facilities, the improvements are divided to provide
further detail. The following are the proposed improvements:-
1) Passenger Terminal Building Expansion and Modifications
2) Airside Apron Expansion
3) West New VVIP block
4) New energy centre
5) Expansion of chiller plant and utilities
6) Kerbside improvements on airside and landside
7) Terminal forecourt improvements
BIAL conducted consultation processes on the following with the stakeholders including
airlines:
a. Master Plan aviation activity forecast for BIAL on 06th May 2010
b. T-1 expansion project on 06th August 2010
c. T-1 expansion airline sign-off on 15th July 2011 and
d. Smile Bengaluru Consumer campaign from Sept 27th 2010
The project started on 01st August 2011 and is expected to be completed in phases by
March/June 2013.
2. Runway 2 including Taxiway and Apron Phase 1 and Phase 2
Bangalore has experienced rapid growth in passenger volumes, and will continue to realize
significant growth over the 20-year planning period. In 2011/12, 12.7 million passengers
(mppa) traveled through Bangalore, versus 1.8 million annual passengers in 1995/96. The
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year-on-year growth for 2010 to 2011 represents an annual growth rate of 9%, and CAGR of
14% per year for the past 15 years. International traffic has been the fastest growing segment,
increasing from a reported 1.2 percent of total passengers in 1995/96 to nearly 20 percent
currently.
The continued robust growth in the local Bangalore and broader Indian economy are expected
to be the primary drivers of domestic air travel at Bangalore. Bangalore has a large
population base, a diverse and a high value-added economy from which to stimulate air
travel. It is assumed that the Bangalore economy will at a minimum mirror and potentially
exceed the economic growth of India as a whole, over the forecast period.
In order to predict the impact these drivers will have on aviation activity and for the Master
Plan update, a forecast update was developed by Landrum and Brown, Inc. for Bangalore in
2010. The Forecast provides the basis for establishing a long-term master plan and as such,
supports decisions related to the planning and implementation of capital and operational
improvements necessary to efficiently serve air transportation demand throughout the
planning period. The Forecast was developed through an evaluation and analysis of several
key areas such as:
Airline schedules
Indian aviation industry trends
GDP growth and econometric analysis
Comparable airport trends
Airport maturation considerations
Growth in low-fare market vs. network carriers
Master Plan
In order to meet the projected demand, a master plan has been developed to accommodate
55 mppa over the planning horizon and has been phased accordingly in line with demand. A
new runway, new terminal and associated airfield and apron works are proposed to cater to
the passenger demand. The Land Use Plan was presented to the airlines on 28 March 2011 to
keep them informed of the Plan which materialized following their input on the airports
forecast. The stakeholder briefing included discussion on the capacity challenges and
development strategy, new runway and associated airfield development, passenger terminals,
roadways and external connectivity and the airports overall land use plan.
Existing Runway and Capacity Constraints
The existing airfield consists of Runway 9-27, which is 4,000 meters long and 45 meters wide,
Taxiway A, which runs parallel to the full length of Runway 9-27, three rapid-exit taxiways
G F E B A1 A6 A
0
9
2
7
K H D
Figure : Existing Runway Configuration
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(RETs), and one taxiway perpendicular to the runway. The existing airfield handles
approximately 26-28 aircraft movements per hour on typical busy weekdays and
approximately 32 movements per hour on special occasions. Taxiway A runs south of and
parallel to the existing runway along its entire length and provides the only means of
circulating between runway thresholds and the aircraft parking apron. An overview of the
existing layout of the Airport is provided in Figure below.
Existing Runway 09-27 Capacity
Physical and operational scenario Hourly
Capacity*
Annual capacity (ATMs)
Existing configuration under existing air
traffic control procedures
36 136,000
Existing configuration with improved air
traffic control procedures (reduced in-trail
separations and reduced departure-departure
separations)
45 170,000
Improved configuration with additional RETs
and improved air traffic control procedures
46 172,000
Source: Jacobs Consultancy analysis, January 2011
*Hourly Capacity assumes 50% Arrivals
Need for Second Runway
Aircraft operations were projected to grow from 119,033 in 2012 to approximately 550,000
operations at the 2029-30 demand level, the planning horizon considered in the Master Plan
Update. Considering the current traffic trend, a second runway, the New South Parallel
Runway (NSPR), will be required by 2017/18. The need for the NSPR was also established in
prior planning studies and confirmed again in the Master Plan Update.
3. Second Terminal (T2) Phase 1 and 2
Bangalore International Airport Limited (BIAL) became operational in 2008. The initial phase
of development included a passenger terminal building (T1), a runway, entrance/ exit
taxiways, an isolation bay, airside road system, access roads, along with other ancillary
developments. BIAL is moving into the next phase of development, under which T1 is already
being expanded to cater to the growing demand, until the second Terminal (T2) is in
operation.
As part of next phase, further development at airport is being planned, based on the updated
forecast and Master Plan, which includes a new Terminal, second Runway and associated
development. BIAL intends to develop new terminal facilities to meet the passenger demand
and has initiated the process to appoint a lead consultant for the design of the Terminal 2 and
related projects. It is anticipated that the first phase of the new Terminal 2 for 20 mppa and
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related facilities (with provisions for future expansion to 35 mppa in Phase 2), will be
required to be operational by 2017-18.
BIAL had invited Expression of Interest from experienced, internationally reputable
Architectural consultancy firms to provide Architectural and Engineering Design Consultancy
Services for Terminal 2 (T2) and associated works at the Airport.
Maintenance Capex Projects
Maintenance Capex Projects are required to be undertaken to ensure that the existing
facilities are maintained and are geared to be able to perform till the intended useful life.
Following are the key maintenance Capex costs projected:
The major maintenance capex investments in Control Period 1 are:-
a. Disabled aircraft removal equipment - Disabled aircraft removal is a specialized activity
for which specific resources are required to ensure safety and business continuity. As BIAL
has only one runway it is critical to have the capability to remove the disabled aircraft
from the movement area. There is only one basic kit available in Mumbai for the entire
south Asia, which again is not compatible for Code F category aircraft. The procured kit
can be made available for other airports in the region on cost sharing basis. Use of this
equipment by concerned airline at BIAL will also be on rent basis.
b. Integrated crisis center cum Haj terminal To improve and provide adequate facility to
take complete command-control, coordination- communication of disaster scenarios,
resulting in efficient management of contingency.
c. Airside infrastructure mainly airfield pavement, strengthening of perimeter wall,
replacement of the runway, taxiway, approach, threshold, PAPI lamps at a time once in
three years with the past trend, replacement of polycarbonate facias of all the 70
signages after a period of 8 years, considering the upgradation from CAT I to CAT III in the
year 2017-18.It is planned for this upgradation after the NSPR comes into existence and a
stabilisation period of one year after installation of NSPR
d. Electrical and electronic system at the terminal mainly replacement of UPS batteries,
light fixtures, LT control panels, automatic doors etc
e. Software licenses and implementation mainly SAP and HR related
f. Extension of Kerbside of Terminal 1 for Passenger Services, Retail and F&B.
Following is the summary of key costs to be incurred for different projects in the First Control
period
S # Activity Name Cost proposed to be
incurred in First Control
Period Rs. Crore
1 Disabled aircraft removal equipment 8.00
2 Integrated crisis center cum Haj terminal 6.00
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3 Airside infrastructure development 5.84
4 Terminal area infrastructure development 6.72
5 Extension of Kerbside of Terminal 1 35.00
The bifurcation of historical values of fixed assets and costs in Aero and Non-Aero is based on
the Auditors certificate issued after conducting agreed upon procedures. A copy of the
certificate has been submitted earlier. On the same basis, the projected fixed assets and
costs are bifurcated to estimate the future Aero and Non-Aero Assets.
The Aeronautical Assets, Non-Aeronautical Assets, Aeronautical Services and Non-Aeronautical
Services are as defined under Clause 1.1 and Clause 1.2 of the certificate submitted earlier.
Real Estate Development
1. Airport Business Hotel Project
The Bangalore International Airport at Devanahalli which opened on 24th May 2008 has
improved Bangalores transportation links with other Indian and international cities, and also
is becoming a major catalyst for regional economic development in Karnataka and poised to
be the Gateway to South India. A business hotel of international standards is an important
facility at each international airport.
Pursuant to the Land Lease Deed, BIAL has been granted exclusive lease hold rights to the
Project Site for aeronautical and non- aeronautical activities with the development of hotels
as one of the non-aeronautical activities expressly permitted therein.
In view of the aforesaid, BIAL intends the establishment of a premium business hotel and
conference facility at the Project site at standards compliant with international best
practices.
Pursuant to the above, various consortiums submitted their proposals against the tender
document and the consortium of EIH Limited and Larsen & Toubro Limited were awarded the
rights for design, construction, financing, commissioning, maintenance, management and
operation of the facility. A Framework Agreement for design, construction and operation of
Business Hotel facility at the New Bangalore International Airport limited was entered to by
BIAL with EIH Ltd and L&T Ltd on 16th November 2006. The Consortium incorporated a Joint
venture company, Bangalore Airport Hotels Limited under the Companies Act, 1956.
L&T had submitted an income statement in response to the tender for airport hotel which is
also part of the agreement. The original bid was for airport hotel with a height of 45 m, 321
keys and a total area of 273,404 sq.ft. Since then there has been changes in the specifications
due to reduction in building height and hence other options like reduction in rooms and also
additional land were explored.
BIAL has consented for commencement of construction by its letter dated 18th September,
2007. BIAL has issued in principle approval for lay-out and plan by its letter dated 16th
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October, 2007. Subsequent to the execution of Framework Agreement, on 14th November
2008, the Airports Authority of India has issued a no objection certificate with a height
clearance for only 30.36 metres above ground level.
In light of these restrictions, the Consortium has expressed to BIAL its inability to continue to
develop and operate the facility in accordance with the terms of the Framework Agreement
and sought certain additional concessions from BIAL or for a settlement of the cost incurred.
After a series of discussions, since the dispute was not resolved, it was agreed to go in for
arbitration to settle the disputes and hence currently the project is on hold and is undergoing
an arbitration procedure.
BAHL has paid a security deposit of Rs. 76.5 Cr in 2006 which was reflected as a part of
liability in the Financial Statements. In view of the pending disputes, this amount is proposed
to be repaid in 2012-13.
2. Future Real Estate development
Neither real estate activity nor investment is envisaged as the business plan for real estate
has not yet been firmed up and also no investment has been made as on date.
Hence, real estate business scenario has not been considered in the MYTP and the Business
plan submitted now.
3.2 Means of Financing
Business Plan submitted proposes that Debt will be drawn down to the extent of availability
subject to meeting the defined Debt Service Coverage Ratio of 1.4 as specified in loan
agreement and Gearing Mix of 70:30 (Debt:Equity) to be maintained between Debt and
Equity, both of which are defined across the various years. Pursuant to this, the pattern of
funding of Capex Projects in the first Control period is detailed below:
Rs. Crores
Particulars Year 1 Year 2 Year 3 Year 4 Year 5
Capex cost including Interest During Construction
510.7 866.7 391.8 583.7 1585.0
Means of Financing
Debt - 862.4 51.4 - 697.3
Internal Accruals 510.7 4.3 340.4 583.7 888.7
Funding Gap - - - - -
The shareholders have indicated, vide Board Minutes dated 6th Sept 2011 that no further
Equity Infusion will be possible into the Airport and any scenario indicating Equity Infusion
requires the matter to be brought back to the BIAL Board.
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3.3 Cost of Debt
Following are certain key components and assumptions on existing facilities, new facilities
and existing & forecast cost of debt over the proposed five year regulatory period.
Existing Facility:
Initial phase of debt funding for the base airport project was substantially through rupee
loan. Amount remaining was funded through External Commercial Borrowing (ECB) loan.
Rupee loan funding arrangement was made for Rs. 1154.3 Crores and ECB loan from ICICI
Hong Kong for $ 50 mio.
The details split of existing loan funding is provided below:
Name of the Bank Loan Availed (Rs. Crores)
Rupee Term Loan
State Bank of Mysore 221.8
Vijaya Bank 301.8
Canara Bank 280.7
Central Bank of India 250.0
Punjab National Bank 100.0
Sub-Total 1154.3
ECB Loan
ICICI Hong Kong * 207.6
Sub-Total 207.6
ICICI Hong Loan converted and presented at Exchange rate of $=Rs. 41.50
Certain key terms and conditions of existing rupee loan facilities & ECB loan are as
detailed below:
a. Existing rupee loan facilities
1. Repayment period: 10 years with a moratorium of 2.5 years
2. Repayment terms: Repayable in 30 quarterly installments commencing from 31st Oct
2010 and ending on 31st Jan 2018.
3. Interest pricing: Interest rate is driven by prevailing market conditions from time to time.
BIAL intends to arrive at a common interest rate for all lenders. However, few banks may
reset interest at different rates, and the highest interest charged by any lender at a given
point of time would be applicable to all other lenders, irrespective of their sanction rate.
4. Interest payment: Interest being serviced monthly.
5. Debt Service Reserve Account (DSRA): As per Loan Agreement, we are bound to maintain a
reserve of one quarter loan repayment amount & one month interest amount at all times
till final settlement of loans.
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6. Debt Service Coverage Ratio (DSCR) As per loan agreement, we are bound to maintain a
minimum DSCR of 1.4 till the expiry of the loan. The same will be reviewed by lenders on
a half yearly basis.
b. ECB loan:
1. Repayment period: 10 years with a moratorium of 2.5 years
2. Repayment terms: Repayable in 30 quarterly installments commencing from 31st Oct
2010 and ending on 31st Jan 2018.
3. Interest pricing: Six months libor + 150 basis points
4. Interest payment: Interest on ECB being serviced half-yearly, on 31st Jan and 31st July
every year.
5. Debt Service Coverage Ratio (DSCR) As per loan agreement, we are bound to maintain a
minimum DSCR of 1.4 till the expiry of the loan. The same will be reviewed by lenders on
a half yearly basis.
6. Debt Service Reserve Account (DSRA): As per Trust & Retention Account (TRA) agreement,
we are bound to maintain a reserve of one quarter loan repayment amount & one month
interest amount at all times till final settlement of loans.
II. Cost of debt for existing rupee loan facilities & ECB loan:
The existing cost of debt for rupee term loan & ECB loan till FY 2011-12 has been considered
as per actual borrowing rate for the respective years.
Future Expansion New Facility Requirements:
The details relevant to debt for funding future expansion (First control period- FY 2011-12 to
FY 2015-16) is covered under New facility.
Debt facility Amount
(Rs. Crore)
Proposed Rupee term loan 1611.1
Forecast Cost of Debt For existing and Future facilities:
a. Existing rupee loan facilities
The forecast cost of debt for rupee term loan has been considered on the basis of expected
borrowing cost for each of the projected years of the first Control Period. The respective Cost
of Debt values for each year of the Control Period ranges from 11.5% to 13.5% as given below:
2012 2013 2014 2015 2016
Cost of Debt (rupee loan) 11.50% 12.50% 13.50% 13.50% 13.50%
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The weighted average cost of debt for rupee term loan upto FY 2010-11 was approx. 10 %.
This is rate has been recently reset upwards by rupee lenders at 11.5%.
Observing, the increasing trend in banks base rates, change in SBI PLR by 250 basis points
(from 12.25% to 14.75%) during August 2010 to Aug 2011, a nominal increase is assumed to
forecast the cost of debt for rupee loans.
b. ECB loan
The forecast cost of debt for ECB loan for the period from 2012-13 is assumed at 10.15%. This
is assumed based on indicative cost of complete hedge as conveyed by banks.
3.4 Cost of Equity
Cost of Equity has been computed based on the Capital Asset Pricing Model (CAPM) as
prescribed in Direction 5. As per the report received from KPMG, which is detailed as
Annexure 1 herewith, the estimated Cost of Equity for the first control period under Dual till
is 28.3%.
However, in line with the earlier submission the cost of Equity has been retained at 24.4% in
this revised submission also.
3.5 Fair Rate of Return
Based on the Projected cost of Debt as detailed above, a combined weighted average cost of
debt is computed based on weighted average cost of debt of the External commercial
borrowing and rupee term loans, which forms part of overall cost of debt. Borrowing received
from Government of Karnataka, as a State Support Loan has been considered as part of Debt.
The weighted average gearing for the first Control Period is calculated based on the projected
values of debt and equity, including accruals, at the end of each year.
FRoR is computed as mentioned below:
FRoR = (WG * Kd) + ((1-WG)*Ke)
Where:
WG Weighted average gearing of debt to total debt + equity
Kd Weighted average pre-tax cost of debt
Ke Post tax cost of equity computed using Capital Assets Pricing Model (CAPM) approach
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The FRoR calculation is mentioned in the table below:
Particulars
2012 2013 2014 2015 2016
Debt (in Rs. Crore) D 1461.7 2155.0 1983.2 1726.1 2148.7
Equity, including Reserves (in
Crore) E 849.8 1197.8 1600.5 2023.8 2595.6
D+E (in Crore) C 2311.6 3352.8 3583.7 3749.9 4744.3
Kd Kd 10.71% 10.71% 10.71% 10.71% 10.71%
Ke Ke 24.40% 24.40% 24.40% 24.40% 24.40%
Individual yr gearing (G) G 63.23% 64.27% 55.34% 46.03% 45.29%
Weighted average gearing (WG) = (C*G)/(C) 53.42%
Weighted average Kd Rd 10.71%
FRoR
Effective
value 17.09%
State Support Loan has been considered as a Viability Gap funding by Government of
Karnataka. While this has been considered as Interest Free Debt in the above computation,
we request that a return may be considered on the same by the Regulator.
3.6 Depreciation
Depreciation measures the decline in the usefu