- Thursday 09 February 2017
Palisade Investment Partners will be the Sunshine Coast Airport’s commercial operating partner in a deal worth more than half a billion dollars.
Under the deal, the airport will continue to be owned by Sunshine Coast Council, with Palisade operating the asset under a 99-year lease.
Palisade will be responsible for operating, investing and developing the airport and will oversee future negotiations with airlines to expand both domestic and international routes available from the Sunshine Coast.
Mayor Mark Jamieson said that under the deal, the council would maintain responsibility for facilitating the proposed airport expansion project, which included construction of a new runway, apron expansion and related infrastructure.
“Our council is delighted to be able to stand here today with our new commercial partner in the Sunshine Coast Airport and present this outstanding outcome for the people of the Sunshine Coast,” Mayor Jamieson said.
“The total value to the Sunshine Coast community of the deal we have struck with Palisade is an estimated $605 million.
“This reflects not only the fact that our airport is a high quality asset in one of the fastest growing regions in Australia, but also the enormous growth potential that it will deliver once the proposed airport expansion project is completed in 2020.
“It is fair to say that today’s announcement represents the culmination of a journey that we have been on for well over three years.
“It is the product of the extensive work council has undertaken to generate national and global interest in the airport - and indeed the Sunshine Coast itself – through our investment missions and the connections made with institutional and other significant investors in major infrastructure assets.
“This helped to generate 17 expressions of interest from both domestic and international parties and heightened the competitive tension in securing the commercial partner in the Airport – all of which has been to council’s advantage.
“Council has followed an extensive process which included preliminary market testing conducted by Royal Bank of Canada, followed by a call for Expressions of Interest which attracted global interest, an invitation to chosen respondents to submit indicative bids and then an invitation to submit binding bids.”
Mayor Jamieson said Palisade would make lease payments totalling $82 million of which $67 million would be paid when they took control of the airport’s management, staff and non-land assets, expected to be by September 2017.
Palisade has agreed to a further amount of $290 million to be paid for the construction of the new runway in 2022.
Council will retain a financial interest in the operation of the Sunshine Coast Airport by way of an annual rental payment of 5% of gross revenue, conservatively equating to about $205 million over the 99 year life of the lease starting in 2017/18.
Palisade will also take responsibility for future terminal development, thereby reducing the projected cost to council of the airport expansion project by $28 million.
These four amounts see the total value of the deal worth an estimated $605 million to Council.
Mayor Jamieson said that by Palisade taking responsibility for the future terminal development, the revised estimate for the airport expansion project delivered by Council was now $319 million.
“Ensuring the budget estimates for the airport expansion project are met has been a key focus for council, and what we have been able to achieve here is a great outcome for our community,” he said.
“Delivering the airport expansion is one of the region’s five game-changer projects identified in the Sunshine Coast Regional Economic Development Strategy 2013-2033 and is an intrinsic element of this council’s long term vision for our region.
“In entering this partnership with Palisade, council will be able to advance a number of important objectives.
“Firstly, we will be able to ensure the new runway is built in accordance with the Environmental Impact Statement requirements and that it is delivered by 2020.
“Secondly, the way that we have structured the arrangements will ensure the airport’s safe and efficient operations continue throughout the construction program and thereafter.
“Thirdly, the investment by Palisade will fund the airport expansion costs, limiting any long term adverse impact on council’s financial position or on our ratepayers.
“Our partnership with Palisade will also strengthen and grow the airport’s services and capabilities, contribute significantly to the economic growth of our region and at the same time, enable council to maintain an economic interest in the airport – thus ensuring ratepayers share in the airport’s performance into the future.”
Palisade has substantial experience in the airport sector through its investment in Airport Development Group which owns the Darwin, Alice Springs and Tennant Creek airports.
Palisade has also recently invested in Gold Coast Light Rail Stage 2.
Mayor Jamieson said all of the pieces of the puzzle were now in place to enable the expansion of the Sunshine Coast Airport to proceed, which would enable this substantial asset to serve the needs of this community and surrounding regions for generations to come.
“We have the major approvals in place,” he said.
“The Federal Government has committed the $181 million loan which will assist council with the expansion project and now Palisade has been secured as our commercial partner to take the asset forward into its next phase.
“The airport expansion project will contribute $4.1 billion to the Sunshine Coast economy between 2020 and 2040 and result in 3500 fewer dwellings being affected by noise when it is operational by Christmas 2020.
“It will ensure we have an airport that can accommodate larger, more fuel efficient aircraft, enabling more direct flights to more locations in Australia, Asia and the Western Pacific.
“Those new routes will boost our tourism and international trade and help our export businesses, particularly those operating in the food and agri-business sectors, so they get their products and services to markets faster and more efficiently.”
The council anticipates to enter into a construction contract to build the new runway in September this year. The runway project is expected to be completed by December 2020.
A transition steering committee comprising representatives from both Palisade and council will be established to oversee the operation of the Sunshine Coast Airport transition from council to Palisade.