Vanuatu daily news digest | 10 November 2014

Instead of reports from the local press today …


Developer adamant Vanuatu airport will be built

Originally aired on Dateline Pacific, Monday 10 November 2014

Prospective Vanuatu airport developer believes it can turn around opposition to the project.


The consortium proposing a huge airport development in Vanuatu remains committed to the deal despite the apparent opposition of the government.

Vanuatu Trade Development Ltd has a deal to build an airport on Efate, but the government appears to have scotched those plans.

Byron Koh is the managing director of Hermsley Capital, one of the parties to the VTDL consortium.

He says their original plan for a greenfields airport development and a temporary upgrade of the runway at the present airport, Bauerfield, stands.

Don Wiseman began by asking Mr Koh about the government’s commitment to VTDL through a promissory note for the 350 million US dollar value of the development.

BYRON KOH: The reasons that VTD succeeded in its proposal is that it was asking for no financial guarantees or support from the [Vanuatu] government in designing, building or operating the airport. There was an extensive 15 month process of vetting both VTD, its backers, the consortium, its negotiators and in fact that vetting was done by the prime minister at the time, the deputy prime minister, the minister of finance, the attorney general and the government taskforce which was set up which was representatives of all the major government departments that would have involvement in the process. So we would say that the process has been very transparent in terms of government. With respect to the promissory note, the promissory note operates only in the event the government comes and expropriates the airport. That is the only way the VTD can claim against that promissory note and the promissory note covers purely the construction costs of the airport only. So it is designed to be a disincentive for government to expropriate the airport by coming and taking physical control of the airport during the concession period. That is the function of the promissory note.

DON WISEMAN: And the concession period is for 50 years.

BK: Correct. The concession period is for 50 years which is the time needed to recover the investment. To give you an idea of the quantum of the investment – I have obviously mentioned the the 350 million dollar build cost – to give you some perspective on that relative to the overall size of the Vanuatu economy, you will appreciate that the GDP last year was 831 million US dollars, total government expenditure last year by the Vanuatu government was 130 million US dollars, total external debt currently carried out by the Vanuatu government is a little over 200 million dollars, so this 350 million dollars represents a significant investment in the country and to protect that the VTD consortium required a promissory note to protect itself in the event of an expropriation.

DW: Clearly it is something you have imagined could potentially happen.

BK: No obviously we hope it doesn’t happen. That is our desired outcome. But if it did happen the promissory obviously would be there to repay the construction costs of the airport to the investors, who at that stage would have put all the money down to design and build the airport.

DW: As it stands at this stage I guess you guys are a long way back in terms of winning the people in Vanuatu over, so how are you going to do that?

BK: We have been through, since the concession agreement was signed in July of 2013 a period of working with government. Our main priority has been to select a site and that is obviously quite a difficult process. You need to have a site that can accommodate quite a large airport. An airport that can accommodate a runway of 3,500 metres. It needs to be a site away from current residents. It needs to be a site that doesn’t have any obstacles that would limit take-offs or approaches by aircraft. So in the last year we have been working with government to identify three potential sites. We have shortlisted one which we have nominated to government and in terms of the design process as well we have actually undertaken a preliminary master plan that we have shared with the government. So in terms of keeping the government up to date we are very confident – that includes the past government under the previous prime minister and this current government – in fact we met with this current government as late as June to discuss the plans and the preliminary design, but in terms of engaging with the Vanuatu people we will be working on that in the next couple of months to show the plans and the significant economic and social benefits that will accrue to the Vanuatu people.

DW: This threat that the company has made that it will sue – one of the figures that is being bandied around is that it will sue for 350 million US dollars if it is not allowed to go ahead.

BK: VTD has made its position very clear which is that the contract at this time is on foot. It obviously believes it has significant rights. It has invested a significant amount of money with consultants, airport architects, engineers, quantity surveyors, coring consultants, geo-technical consultants.

DW: A certain amount of money has been spent so you can’t possibly be talking about 350 dollars can you?

BK: I don’t think VTD has ever stated it would be suing for 350 million dollars. Today it has stated it would be suing for incurred costs, costs to date, and amounts it has legally contracted with its consultants and its advisors. But that figure is not 350 million.

DW" No. How far down the road is the company in terms of taking legal action?

BK: Well the company is still optimistic it can break the stalemate with the government. We are reaching out to government, we are obviously in addition to this working on the plans to remediate the runway at Bauerfield. Through that we are obviously working on engineering solutions for that because still remains a runway that needs to be repaired. So we are progressing but also obviously willing to work with government to resolve this current stalemate.

DW: If the repairs to Bauerfield were done and then the building was given the go ahead how long is that process going to take?

BK: Under the current timetable the new international airport will be operating in the second half of 2019. And so during the interim phase Bauerfield would still be kept operational. Obviously we would be looking to transfer the current Bauerfield management and airport staff over to the new airport and that would occur in 2019.