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CABINET GREEN LIGHT LAST HURDLE IN STORMY AIRPORTS TENDER

Schwechat ready to board Slovak competition

THE TWOONE consortium that includes Vienna airport cleared another checkpoint in its pursuit of Slovakia's two largest airports, and now awaits only a boarding pass from the Slovak cabinet to complete the acquisition.

photo: TASR

THE TWOONE consortium that includes Vienna airport cleared another checkpoint in its pursuit of Slovakia's two largest airports, and now awaits only a boarding pass from the Slovak cabinet to complete the acquisition.

The ambition of Vienna's Schwechat Airport to strengthen its position in the region received a boost on January 9 after Transport Minister Pavol Prokopovič confirmed the TwoOne consortium as the preferred bidder for the 66-percent stakes on offer in Bratislava and Košice airports.

Prokopovič upheld the assessment of a tender commission which in mid-December picked TwoOne out of a field of four bidders. TwoOne consists of Schwechat, Austria's Raiffeisen Zentralbank and the Slovak financial group Penta Investments.

The minister's decision was challenged by one of the failed bidders, Independent Slovak Airport Partners (ISAP), as well as the country's political opposition. Even some ruling coalition officials expressed misgivings over the airport privatization, which has been as controversial as any in the Mikuláš Dzurinda cabinet's second term.

ISAP is made up of Germany's Cologne-Bonn Airport, the Galaxy Infrastructure Fund, the Canadian SNC-Lavalin International, and Austrian Airport Consulting Vienna.

The consortium, which has repeatedly claimed it offered more for the stakes than TwoOne did, berated the minister for accepting the recommendation of the tender commission rather than studying the bids and the course of the tender.

The ministry claims that Prokopovič did study the bids submitted.

If the Slovak cabinet approves TwoOne as the new owner of the airports, ISAP has promised to continue its fight and challenge the privatization process, which attracted the attention of the European Commission in late 2005.

The most frequent concern raised in connection with TwoOne's pursuit of Slovakia's main airports was that Schwechat might throttle the development of Bratislava's M R Štefánik airport, which has attracted four low-cost European airlines, and turn it into a cargo terminal with few attractive passenger flights.

In late December, a tender advisor revealed that the TwoOne consortium had presented the weakest business plan for the Bratislava and Košice airports.

The consortium has rejected such views. In a memo sent to The Slovak Spectator, TwoOne said that developing Bratislava and Košice airports and making air transport accessible to the citizens of both regions was the priority for the consortium.

"The size of our investment and the extensive investment programme we took on the obligation to pursue is a guarantee of our interest in the development of the region," said Herbert Kaufmann, chairman of the board of directors of Flughafen Wien.

TwoOne does not see the proximity of the Vienna and Bratislava airports, which are about 50 kilometres apart, as an opportunity for Vienna to stifle competition.

"The proximity of Bratislava and Vienna gives us a chance to use existing synergies to transfer know-how, and offers inhabitants of the region more choices," said the TwoOne statement.

Minister Prokopovič also dismissed fears that the development of Bratislava airport might be held back to protect traffic volume at Vienna airport.

"I don't think that an investor who pours Sk14 billion (€375 million) into something would later want to choke it," Prokopovič told journalists.

The minister said that the airport sales contracts will oblige the buyer to invest a certain amount of money into a certain number of projects. If the investor fails to meet these commitments, Slovakia will be able to back out of the deal.

However, ISAP has argued that if it were in charge of Bratislava airport, it would turn it into a highly competitive business and a significant threat to Vienna airport.

"That's why Vienna airport is so interested in gaining control over Bratislava airport," said Michael Garvens, the director of Cologne-Bonn airport (a member of ISAP), at a press conference on January 10.

ISAP also restated that it had offered the best price for the airports and has the best business plan and the best know-how.

Johan Frank of the ISAP-member Airport Consulting Vienna claimed on January 4 that ISAP had offered Sk9.06 billion (€240 million) for the two airports. The Slovak media, citing leaked tender information, reported that TwoOne had bid Sk6.9 bilillion (€183 million).

Galaxy infrastructure fund director Corinne Namblard-Bouverot said on January 10 that the ISAP "purchase price for Bratislava airport was set at Sk8 billion (€212 million)," while the consortium had offered Sk1.6 billion (€42 million) for the Košice stake.

But Prokopovič said that the information leaked to the media was incorrect, and on January 10 made the official bids public.

According to the minister's data, TwoOne offered Sk900 million (€23 million) for Košice airport plus Sk380 million (€10 million) in investments, and Sk6 billion (€159 million) for Bratislava airport plus investments of Sk7.9 billion (€209 million). ISAP, meanwhile, offered Sk4.8 billion (€127 million) for Bratislava airport and an additional Sk3.2 billion (€85 million) to be paid at the closing of the privatization transaction. ISAP offered Sk740 million (€19.6 million) for the stake in Košice plus investments worth Sk360 million (€9.5 million).

Minister Prokopovič did not recognize ISAP's supplementary offer of Sk3.2 billion, leaving the consortium in third place behind a consortium led by Spain's Abertis and including Slovakia's J&T financial group. Tepe Akfen Ventures of Turkey finished in last place

The transaction is subject to the approval of the Slovak Antitrust Bureau, which has said it will not comment until the airport privatization is approved by the cabinet.

Last April, the Slovak media published a letter from the Antitrust Bureau to the Transport Ministry that suggested the possible takeover of Bratislava airport by Vienna International Airport might be problematic.

The Bureau warned that the state should not pick a strategic partner for Bratislava airport that was in any way connected to Vienna International Airport, as it would mean linking two nearby airports, the SITA news wire reported.

However, Antitrust Bureau spokesman Miroslav Jurkovič told The Slovak Spectator that the Bureau had asked that the state respect the Act on Protection of Competition, and that economic competition criteria be included among those that bidders were required to meet.

"These demands were accepted and included in the airport privatization concept adopted by the cabinet," he said.


Political stumbling blocks


The privatization tender needs only cabinet approval to become final but signs are emerging that political complications could arise.

Minister Prokopovič, a member of Prime Minister Mikuláš Dzurinda's Slovak Democratic and Christian Union (SDKÚ) party, said he was optimistic that the ruling coalition would approve his choice.

However, the ruling coalition's Christian Democratic Movement (KDH) has objected to the proposed investor, while the Hungarian Coalition Party (SMK) is reserving judgement.

Dzurinda has said he sees no reason for the ruling coalition to debate the privatization at this point.

The opposition, on the other hand, has rallied around its antipathy to the sale of the airports to TwoOne.

While the Free Forum is calling for the tenders to be halted and their terms examined, the strongest opposition party, Robert Fico's Smer, has rejected the tender outright and says it might kill the deal if it wins power in September 2006 elections.

The opposition Movement for a Democratic Slovakia (HZDS) would like to see the process postponed and the next government make the decision, while the New Citizen's Alliance (ANO), a former member of the coalition, says TwoOne should be rejected because "it is against Slovakia's strategic interests."


Turbulent developments


The tender has been a stormy one. In early January, an anonymous two-page document circulated among the media claimed that "Cologne airport is not actually a member of the ISAP consortium, nor does it own part of any member of this consortium... This contradicts the rules of the tender."

Nobody has claimed authorship of this document, which came from the e-mail address of a spokesperson for SkyEurope, a low-cost airline operating out of Bratislava airport, the TASR news wire reported.

In response to the mail, ISAP said that Cologne-Bonn airport had joined the ISAP consortium at the beginning of the tender and remained a member.

"This document is a pointed attempt to discredit the ISAP consortium," ISAP said in a statement.

Earlier complaints about the TwoOne consortium's bid had nearly resulted in its expulsion from the tender. However, the tender committee's advisor, the Austrian Meinl Bank, said that TwoOne met the criteria and should remain in the race.

Vinci Concessions withdrew from the running on November 13 last year after the media exposed a financial connection between one of the consortium's principle investors and Raiffeisen Zentralbank.

Austrian A-way, bidding with the French company Vinci, had the same members on its advisory board as Raiffeisen Holding, which controls Raiffeisen Zentralbank, a major party in the TwoOne consortium. The submission of "double bids" violates privatization rules.

At the time, TwoOne representatives told The Slovak Spectator they saw no reason to quit the competition. TwoOne also questioned whether the European Commission had any jurisdiction over the privatization deal, even if it disapproved of the process.

"The law stipulates that the Slovak government will pick the winner by issuing a privatization decision," TwoOne representatives said.

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