The Airports Company South Africa (Acsa) is expected to post a loss for its last financial year, ending March, which will be its first loss since being created in 1993. The R500 million loss is due to delays in finalising new tariffs.
Acsa is R16 billion in debt following its massive R17 billion infrastructure investment project, which overhauled South Africa’s airports for the World Cup. The new Central Terminal at OR Tambo International cost R2.2 billion while the new King Shaka International Airport cost R6.8 billion, according to Acsa.
Earlier this month Acsa and France’s Agence Francaise de Developpement (AF) signed a 15-year loan, which includes a five year grace period) of 200 million euros for refinancing short-term debt incurred to upgrade Cape Town International Airport, News24 reports.
Acsa’s debt will affect its borrowing ability, IOL reports. Acsa has to pre-fund its capital expenditure and is permitted to recover its investments from tariffs once those assets are operational.
“The delay in finalising an appropriate tariff structure has resulted in significant erosion of our financial earnings. Further, given the regulatory uncertainty, it is impossible to commit to future infrastructure investment,” Acsa finance director Priscillah Mabelane said.
The company had requested a 133 percent hike for 2010 and 2011, but its regulator proposed 60% for 2010/11 and a further 25% for 2011/12 before approving a 40.7% increase. Acsa disputed the decision, and approached the courts in an attempt to get a review of its regulatory system.
However, transport minister Sibisiso Ndebele intervened, halting legal action and setting up a task team to look into the matter, IOL reports. “The team will, among others, consider and analyse all information tabled as part of the application for the permission by all parties. It will also interact with stakeholders and advise on whether the proposed permission and suggested tariffs are appropriate, considering all the circumstances. This does not in any way undermine the independence of the regulator, but rather aims to complement their work,” Ndebele said in August last year. A final report with recommendations was submitted to the minister earlier this year.
Acsa implemented a 33% increase in tariffs, but said it would have been in a similar loss making financial situation if it had implemented the allowed 40.7% increase.
Mabelane said that Acsa was encouraged by the fact that the task team had completed its review, but was concerned about the impacts the delay in changing the tariff structure would have on Acsa, passengers and airlines since the tariff would have to be recovered over a short period of time.
Mohammed Sizwe, the chairman of the regulator, said the minister of transport had asked it to consider the tariff application again.
“There are a number of issues like the treatment of the old Durban International Airport site. We had considered a figure from the sale of that site based on information from the department that the land would be sold, which would have been income to Acsa,” Sizwe said.
“But the land has not been sold and we have been told it is still going to take some time before it is sold. But that is simple, all we have to do is take that figure out. It was a total of R2 billion,” he added.
Acsa is currenty negotiating with Transnet, which wants to build a new port for R100 billion at the site.
In the year to March 2010, Acsa posted a 6 percent rise in normalised earnings (earnings adjusted for ups and downs in the economy) before tax, interest and depreciation to R1.8 billion, Business Report says. Its cash balance was R434 million.