ACSA to monetize investment property portfolio to improve liquidity

OR Tambo International in Johannesburg.
OR Tambo International in Johannesburg.

The adverse impact of Covid-19 on global aviation has led the Airports Company of South Africa (ACSA) to revise its strategy and financial plan.

The state-owned company recently issued a request for proposals for transaction advisory services to advise it on the potential monetisation of some of its investment property portfolio.

The transaction adviser, once appointed, will assess, and advise on the appropriate monetization programme and the portfolio.

The monetization process is likely to involve a variety of mechanisms proposed by a transaction advisor. However, ACSA has no intention to sell or otherwise dispose of any investment property assets says Chief Financial Officer, Siphamandla Mthethwa.

In responding effectively to the devastating impact of the pandemic, we have adapted our strategy to focus on enhancing Airports Company South Africa’s core aeronautical activities. Our strategic response includes a process to release wealth associated with non-core assets”.

The monetisation of non-core investment properties will make cash available for core business activities as well as reduce the budget allocation to non-core activities. In the process we are confronting tough choices and difficult decisions. However, we believe that our response is necessary to sustain Airports Company South Africa through the recovery in aviation which will take at least three to five years”.

ACSA’s asset base of more than R30-billion includes an investment property portfolio of R7,7 billion.

The company says the properties in its portfolio have consistently performed well above the cost of capital, subsidising landing fees for airlines and passenger service charges for passengers. The company has already reduced annual operational expenditure by R1,2 billion, while capital expenditure of R14,5-billion has been deferred.

Before Covid-19, Airports Company South Africa enjoyed a reputation as a well-run state-owned company. We believe that this reflects qualities embedded in our culture that position Airports Company South Africa to manage through the crisis in the best way possible,” says Mthethwa.

Airports Company South Africa has also announced the sale of its 10% equity holding in Mumbai International Airport Limited (MIAL) for approximately R1,2-billion. Mthethwa says that the sale of the stake in Mumbai International Airport Limited marks a successful and profitable exit for Airports Company South Africa from the investment the company made in 2006.

The sale to Adani Airport Holdings includes the transfer of airport operator rights held by Airports Company South Africa to MIAL. This means that the company will also be released from providing an Airport Operator Guarantee that amounted to R700-million in the 2020 financial year.

From the outset in 2006, Airports Company South Africa provided management expertise to the airport and supported its infrastructure development and expansion. We are proud of the achievements we have supported at Mumbai International Airport over the past fifteen years,” concludes Mthethwa.