May 2, 2012 / 8:40 PM / 7 years ago

Puerto Rico picks two finalists for airport privatization

May 2 (Reuters) - Puerto Rico officials eyeing a possible $1 billion payday on Wednesday said they had narrowed to two the finalists for a public-private concession to run the Caribbean island’s Luiz Munoz Marin Airport for as long as half a century.

The Puerto Rico Public Private Partnership Authority and the Ports Authority announced as finalists, consortiums Grupo Aerpuertos Avance (GAA) and Aerostar Airport Holdings LLC (AAH). They were chosen from as many as six bidders which had made offers in March.

GAA is a consortium headed by Ferrovial Aeropuertos , which operates six airports in the United Kingdom including Heathrow, and Macquarie Infrastructure & Real Assets , the world’s biggest infrastructure investment fund with interests in airports in Brussels, Australia and elsewhere.

AAH is comprised of Aeroportuario del Sureste, which operates nine Mexico airports, and Highstar Capital, which has made investments in Baltimore and London and has close relationships with British Airways, Lufthansa and AirFrance, according to the PPPA.

“This is a transformational initiative not only for our airport’s infrastructure but also for the positive effect it will have on our economy,” PPPA Executive Director David Alvarez said.

Officials in recession-bound Puerto Rico are looking for a concession of no more than 50 years at the San Juan airport. They also want both improvements worth $40 million to $60 million in the first five years of a contract and longer term investments.

Alvarez said that plans submitted by the two consortiums had exceeded government expectations of the long-term investment envisioned at the island’s principal airport.

“We will wind up with basically a new airport,” he said.

Puerto Rico’s international airport handles just under 9 million passengers a year. It is not living up to its potential, according to officials. Outbound boardings fluctuate between 4 million to 5 million annually, or half capacity, and only half its facilities are in use.

The government expects a big upfront payment, with most of the money used to pay off some of the $900 million of outstanding debt issued by Puerto Rico’s cash-strapped Ports Authority.

Alvarez would not discuss government expectations but in the past officials said they expected to raise $1 billion. The government will also get a percentage of an operator’s earnings over the life of the contract.

Alvarez said a winner would be picked before the end of June, and then the deal would undergo a Federal Aviation Administration review, a process that could take three months.

This is the second large public-private deal Puerto Rico is working on. Last year, the U.S. commonwealth undertook a 40-year concession for roadways PR22 and PR5 to Metropistas.

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