European financial institutions’ fund acquires stake in Greek airports

The Marguerite Fund, based in Luxembourg and Paris, has announced that it has acquired a 10% stake in Fraport Greece, the owner and operator of 14 regional airports in Greece. The stake was sold by Slentel, a company of the Copelouzos Group, which remains a minority shareholder in the company alongside Fraport AG. This transaction, which closed in Dec-2017, marks the 20th and final investment of the Marguerite Fund that is now fully invested. On 30-Nov-2017 a successor fund, Marguerite 2, was launched with a capacity to invest over EUR700 million in infrastructure-intensive projects across the EU and pre-accession countries.

The first fund managed by Marguerite, the 2020 European Fund for Energy, Climate Change and Infrastructure (“Marguerite 1”), was established in 2010 with the backing of six major European public financial institutions and the European Commission, with EUR710 million of commitments, to make capital-intensive infrastructure investments within the EU. Marguerite 1 was the first fund of its kind launched by Europe’s leading public financial institutions, and was established to make capital-intensive infrastructure investments and will target attractive long-term and stable risk-adjusted returns. Marguerite 1 is now fully invested and has accomplished its initial targets.

The six core sponsors are Caisse des depots et consignations (France), Cassa Depositi e Prestiti (Italy), the European Investment Bank, Instituto de Crédito Oficial (Spain), KfW (Germany,), and PKO Bank Polski SA (Poland). Two of then (Caisse des depots and KfW) are independent airport investors in their own right. The Fund already has a 20.77% stake in MZLZ (Zagreb Airport terminal); it’s only other known airport sector investment.  Each of the six Core Sponsors has committed EUR100 million to the Fund. In addition, three further investors (including the European Commission) have committed an incremental EUR110 million to the Fund, bringing the current commitments to EUR710 million.

MAP – Marguerite I is now fully invested and has accomplished its initial targets, having committed over EUR 700m equity and quasi-equity capital to 20 investments in 13 member states, across all target sectors, acting as a catalyst for projects with an aggregate size of over EUR 10 billionSource: Marguerite Fund

In doing so, the fund satisfies investment criteria (a minimum of five airports including at least one form outside the investor’s country of origin) to identify it as a ‘Major Global Investor’ in the CAPA Global Airport Investor’s Database, one of less than 60 throughout the world.

Fraport Greece, one of two country-specific subsidiaries of Fraport (the other is Fraport Brazil) was set up to complete (Dec-2016) a EUR1.2 billion contract to lease and manage 14 provincial airports in popular tourist islands, including Corfu and Santorini, for 40 years. It will invest EUR330 million by 2020, to upgrade facilities and more than EUR1.4 billion over the term of the lease. The consortium, where Fraport has a majority stake, also pays an annual fixed rental fee of about EUR23 million. Actual ownership of the airports is retained by the Greek government throughout the concession term.

MAP – Fraport Greece leases and manages 14 provincial airports in popular tourist islands across GreeceSource: CAPA – Centre for Aviation

Fraport Greece has had some problems with this investment. As reported by The Blue Swan Daily in Sep-2017 as the owner, the government wanted to progress more rapidly with runway reconstruction works at Thessaloniki’s Makedonia Airport in Greece’s second city, a flagship of the privatisation process as it is the busiest airport in the group.

But both Fraport Greece and tourism operators, as well as the local Mayor, voiced their concerns and requested the works be postponed until a more appropriate time as otherwise runways would be closed at a bad time. It became a question of who has the right to do what, and when, during a concession.

While the issue appears to have been resolved, that episode, together with the inordinate amount of time it took the transaction to go through in the first place, does raise questions as to why the Marguerite Fund’s managers would want to invest in these airports, in a country which is still debt-ridden and which has privatised its infrastructure like this under duress, not because it wanted to. Many of the fund’s investments are in toll roads, and environmental projects. It is possible that it is a measure of ‘support’ for Greece from these public sector financial institutions to counteract the perceived slight of the European Commission in its debt bailout terms.