-- TCI warns against illegal actions of the CNMC, which may
cause material harm to AENA and damages investor confidence in
Spanish capital markets
LONDON, May 27, 2015
/PRNewswire/ -- The Children's Investment Fund Management (UK)
LLP ("TCI"), a London-based
investment firm managing in excess of $10
billion in assets, released the below statement regarding
AENA, S.A. (AENA.MC) ("AENA"), the Spanish airports operator. TCI
is the second largest shareholder of AENA, with over 7.7%, behind
the Spanish government, which owns 51%.
"International investors were fundamental to the Spanish
government's effort to sell 49% of AENA to the public in one of the
largest eurozone privatizations. The Spanish government actively
encouraged foreign investment through this process, and because of
the support of TCI and other international investors, the IPO of
AENA in February 2015 was a major
success. It was the largest IPO in Spain since the financial crisis, and signaled
that Spain was able to attract
foreign investment to drive economic growth.
"Investors thoroughly evaluated AENA, including the regulatory
framework and agreements related to how airport costs are allocated
to AENA and the airlines in the 46 airports AENA manages throughout
Spain. Both the regulatory
framework and the cost allocation agreements were well established,
and factored materially into how the IPO was priced and sold.
According to the existing framework (Act 18/2014), the tariff
charges paid by airlines to AENA to reimburse AENA for the
airline's share of airport costs, will be frozen for the next 10
years.
"Now, just two months after the IPO, the Spanish Comision
Nacional de los Mercados y la Competencia ("CNMC") (National
Markets and Competition Commission) issued a resolution seeking to
change the allocation of airport costs materially, shifting costs
from the airline companies onto AENA, which is likely to cause
economic damage to AENA exceeding €1 billion.
"This resolution is arbitrary and unexpected as the CNMC, which
is not a regulatory body, has no legal or regulatory authority over
the way by which airport costs are allocated. The Direccion General
de Aviacion Civil (General Directorate on Civil Aviation) stated
that the CNMC criteria were illegal when the CNMC published
information on its intention to apply a new methodology. Further,
TCI has commissioned two leading Spanish law firms to study this
issue and both have come unequivocally to the same conclusion.
"Separately, the cost methodology in the CNMC's resolution is
logically flawed and has no international precedent in the airport
sector. It departs from established global methods for allocating
costs between airline companies and airport operators, as
recommended by the International Civil Aviation Organization
("ICAO"). The CMNC's methodology also departs from the established
methodology currently in use between AENA and the airlines in
Spain, and approved by all
regulators in preceding years.
"Finally, the tariffs AENA charges to airlines are already below
industry averages. The 10-year freeze established by law in 2014
will result in an annual decrease in the tariff on an
inflation-adjusted basis, as compared to most airport tariffs which
automatically rise based on inflation. What the CNMC is seeking to
do would result in boosting the profits of foreign airline
companies at the expense of AENA, harming AENA's owners including
the Spanish government, and impacting AENA's resources and
international competitiveness, which the government sought to
improve through the IPO.
"The CNMC's surprise action creates legal uncertainty not only
for investors in AENA, but in all Spanish regulated entities. Just
as Spain is emerging from its
economic downturn, the CNMC's proposed actions damage confidence in
Spanish capital markets by raising questions over whether the rule
of law will be upheld.
"On 13 May, AENA, which continues to be majority owned by the
Spanish government, filed a judicial claim before Spain's Audiencia Nacional (National Court)
against the CNMC's resolution. On 18 May, a TCI fund
subsidiary filed an additional and complementary judicial claim
with the Audiencia Nacional. Both claims ask that the effects of
the CNMC's resolution be suspended until the Audiencia Nacional is
able to rule on the matter."
Background Information:
- AENA, S.A. ("AENA") is the largest operator of airport
terminals. The Madrid-based
company operates 46 terminals in Spain and 15 outside of Spain.
- The Children's Investment Fund Management (UK) LLP ("TCI") is a
London-based investment firm that
manages in excess of $10
billion.
- In 2014, the Spanish government initiated a process to sell 49%
of AENA to outside investors in order to help AENA take advantage
of its leading position to grow internationally.
- The IPO was completed on 11 February
2015. It was a major success for Spain, raising €4.3 billion, and was the
largest IPO in Spain since the
financial crisis, and the largest IPO in Europe since 2011.
- According to the existing framework (Act 18/2014) the tariff
charges paid by airlines to AENA to reimburse AENA for the
airline's share of airport costs, will be frozen for the next 10
years until 2025. This mechanism offers strong visibility to
airlines, as most other international airports have tariffs which
are indexed to the CPI and therefore increase yearly. In
Spain, tariffs will be frozen for
10 years, representing an annual reduction on an inflation-adjusted
basis.
- On 23 April 2015, the Spanish
Comision Nacional de los Mercados y la Competencia ("CNMC")
(National Markets and Competition Commission) issued a resolution
directing a change in the tariff structure that would have the
effect of decreasing AENA tariffs and therefore allocating more
airport costs away from airlines.
- The CNMC's responsibilities involve monitoring price setting
discussions to ensure fair and transparent processes, and resolving
disputes with the users, but the CNMC does not have the authority
to regulate or dictate prices.
- In May 2015, both AENA and a TCI
fund subsidiary filed judicial claims with Spain's National Court, the Spanish Audiencia
Nacional, challenging the CNMC resolution, and seeking additionally
to have the resolution suspended until the Audiencia Nacional is
able to rule on the matter.
- Should the CNMC succeed in its efforts, AENA and its
shareholders, including the Spanish government which owns 51% of
AENA, would suffer material damages that could exceed €1 billion.
The CNMC's proposed methodology would boost airline profits at the
expense of AENA.
- As the CNMC monitors regulated price setting discussions across
Spain, the potential that it
exceeds its mandate and attempts similar tactics in other regulated
activities creates uncertainty for investors in Spanish companies
and damages investor confidence in Spanish capital markets at a
time when Spain is emerging from
its economic downturn.
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