Association of Private Airport Operators(APAO - AERA

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SNo I 7. Airport Airport Xiamen International Airport Co Mean I Debt/ Equity (Market Value) Association ofPrivate Airport Operators Response to A ERA 's Consultation Paper No. 32/201 1-12 dt, 03 Jail 2012011 determination ofAeronautical Taritt in resnect ofIGI Alrnort, New Delhi DeW Equity I Asset Beta (Book Value) (Market Value) I 0.01 0.16 0.91 0.77 29t1l February 2()12 Asset Beta (Book Value) Median 0.80 0.76 3.25 APAO had commissioned a study on Cost of Equity on Indian Airports by Mis . KPMG and the report has been made available to the Authority during 2010. Mis . KPMG after extensive research had recommended a return on equity of 20-23 % for Indian Airports. APAO also made a presentation before the Authority on this report. So far we have not heard any concern or doubts or clarifications on this account from the Authority. 3.26 Estimates bv other consultants: KPMG and Leigh - Fisher Management Consultants are global consultants with vast knowledge and experience in airports including valuation of airports. 0.82 0.68 Page 150f41
Association ofPrivate Airport Operators Response to AERA 's Consultation Paper No. 32/2011-1 2 tit. 03 Jail 2012 011 determination otAeronautical Tarittin resoect of/GI Airoort, New Delhi 29th February 2012 3.27 Both Leigh - Fisher Management Consultants (Co st of Equity for Indira Gandhi International Airport dated June 2011) and KPMG (Cost of Equity Estimates of Indian Airport Industry) have estimated a higher cost of equity than NIPFP. Comparison between cost of equity estimates of NIPFP, KPMG and Leigh - Fisher Management Consultants are shown below: 'S No. Consultant Cost of Equity Estlmutes 1. NIPFP 14.06% 2. KPMG 20% - 23%'U 3. Leigh - Fisher Management Consultants 25.1% 3.28 The validity of data used by NIPFP in its study has been questioned by independent agencies. Due to underestimation of risks prevalent in emerging markets, specifically the aviation market in India, the NIPFP study would not be an appropriate benchmark for estimation ofcost of equity for IGI Airport. 3.29 Bel1chmarlcillg or retums with other regulatel! sectors: The Authority has analyzed the returns on equity with other regul ated sectors "Central Electricity Regulatory Commission (CERC), in its Terms and Conditions of Tariff Regulations for 2009-14 issued on 20.01.2009, vide regulation 15, computes the RoE at the base rate of 15.5% in the manner indicated therein. The Authority, has noted that in its regulatory framework the Corporate Tax is being allowed as a cost pass through and the RoE on CAPM It is understood that State Electricity Regulatory Commissions normally consider 16% as cost ofequity in respect ofdistribution companies. In the Port sector, the Tariff Authority of Major Ports (TAMP) is understood to be using 16% as return on equity. However, the model oftariff determination of TAMP is different - TAMP finalizes and announces the tariff and escalation factor upfront and then bids out with revenue shar e as the decision or selection parameter. In case ofNational Highways. the NHAI also de/ermines the tolls and escalation factor upfront. In a recent report, a Committee headed by Shri B.K. Chaturvedi, Member, Plann ing Commission has stated that Equity JRR ofupto 18% may be acceptable for certain types ofprojects. " 10 As on 31 March 2010 Page 160f41
Page 2 and 3: Association ofPrivate Airport Opera
Page 4 and 5: List of Abbreviations Association o
Page 8 and 9: 2 Background Association ofPrivate
Page 10 and 11: 1. 2. 3. 4. 5. 6. Auckland Internat
Page 18: Illustration on return to equity in
Page 21 and 22: 4 Traffic Forecast A ssociation ofP
Page 23 and 24: 5 Non Aeronautical Revenue Associat
Page 27 and 28: Association 0/ Private Airport Oper
Page 30: 8 Hypothetical Regulated Asset Base
Page 33 and 34: 9 Service Quality Association ojPri
Page 36 and 37: 11 Voluntary Retirement Scheme (VRS
Page 38 and 39: 12 CPI-X Association ofPrivate Airp
Page 40 and 41: 14 Conclusion Association oj' Priva
Page 42: 15 Appendix 1 Assoclation ofPrivate

Association of Private Airport Operators(APAO - AERA

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