The U.S. Federal Aviation Administration signed off on Tuesday on a 40-year lease of Puerto Rico's Luis Munoz Marin International Airport to Aerostar Airport Holdings LLC, making it the first large U.S. airport to be placed in private hands.
The deal for the Caribbean's busiest airport, with nearly 9 million passengers a year, is a milestone in Puerto Rico's privatization program and a bid to expand tourism to help an economy that has long been ailing.
Puerto Rico officials have valued the deal at $2.57 billion, which includes a $615 million up-front payment and annual revenue-sharing payments estimated to add up to $552 million.
The balance of the deal involves investment in modernizing and improving the airport. Aerostar has pledged to invest an average $46 million in the facility each year, or more than three times the current $13.5 million average annual investment.
"The selected private operator is qualified to operate the airport, meets federal expectations regarding grant assurances, and can comply with general statute requirements relating to airports," the FAA said in a 40-page decision released on Tuesday.
AAH is comprised of Aeroportuario del Sureste, which operates nine airports in Mexico, and Highstar Capital, which has made investments in Baltimore and London and has close relationships with British Airways, Lufthansa and Air France.
The deal will provide new cash to bail out the island's Ports Authority, which is weighed down by nearly a billion dollars in long-term debt and lacks the financial strength to tap U.S. municipal bond markets.
But officials say they also want to grow the airport through the deal, which would lift tourism as the island struggles to recover from six years of recession.
Puerto Rico selected Aerostar last July after a competitive process that originally attracted a dozen bidders. Gov. Alejandro Garciá Padilla, elected in November, said he would support the deal to protect the island's credibility in the international investment community.
But the new governor has stated his opposition to P3s where existing government assets are leased out to the private sector and supports only private partnerships in the development of public works the government cannot afford to build.
In 2011, Puerto Rico undertook a 40-year concession of toll roads PR22 and PR5 to Metropistas to a consortium comprised of Spain's Abertis Infraestructuras and the Goldman Sachs Investment Fund. That deal gave the government a $1.136 billion upfront fee, a commitment to invest $56.1 million in immediate improvements, plus another $600 million in coming years.
(Reporting By Reuters in San Juan; Writing and additional reporting by Michael Connor in Fort Lauderdale. Editing by Andre Grenon)