6 August 2012 Ministry of Communication and Aviation Solomon Islands Government Information Memorandum relating to Private Sector Operation and Management of Solomon Islands Airports and Airfields August 2012 Information Memorandum 1 6 August 2012 Table of Contents 1. Introduction ........................................................................................................................................... 3 1.1. 1.2. 2. Solomon Islands and its aviation sector .................................................................................................. 4 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7. 2.8. 3. Structure ....................................................................................................................................... 14 Capital Expenditure ...................................................................................................................... 16 Funding ......................................................................................................................................... 17 Employees .................................................................................................................................... 18 Independent Expert Organisation ................................................................................................. 18 Ministry of Infrastructure Development role ................................................................................. 18 Doing business in Solomon Islands ....................................................................................................... 19 7.1. 7.2. 7.3. 8. Honiara international and domestic terminal services .................................................................. 13 Operation of air traffic services and air navigation systems ........................................................... 13 Airport rescue and fire fighting services ........................................................................................ 13 Aviation security service ............................................................................................................... 14 Airport and airfield maintenance .................................................................................................. 14 Contracted services to provide ground-­‐handling services .............................................................. 14 Contracted VIP and business airline lounge ................................................................................... 14 Retail concessions including duty free and tourist, café, banking, rental car etc. ........................... 14 The Concession Agreement .................................................................................................................. 14 6.1. 6.2. 6.3. 6.4. 6.5. 6.6. 7. Overview of assets ........................................................................................................................ 11 Honiara International Airport ....................................................................................................... 12 Other airfields ............................................................................................................................... 13 Airport and airfield functions to be provided by the Concession Holder ............................................... 13 5.1. 5.2. 5.3. 5.4. 5.5. 5.6. 5.7. 5.8. 6. Introduction .................................................................................................................................... 9 Airport traffic flows ........................................................................................................................ 9 Airport and airfield asset condition ...................................................................................................... 11 4.1. 4.2. 4.3. 5. Solomon Islands .............................................................................................................................. 4 People ............................................................................................................................................ 5 Government ................................................................................................................................... 5 Climate ............................................................................................................................................ 6 Economy-­‐ Key Facts ........................................................................................................................ 6 Economic Outlook ........................................................................................................................... 7 Government Policy ......................................................................................................................... 7 Aviation sector structure ................................................................................................................ 8 Aviation operations ............................................................................................................................... 9 3.1. 3.2. 4. The Opportunity ............................................................................................................................. 3 Expression of Interest (EOI) Process ................................................................................................ 3 Introduction .................................................................................................................................. 19 Legislative requirements ............................................................................................................... 19 World Bank ranking ...................................................................................................................... 20 Appendices .......................................................................................................................................... 21 Appendix I Concession Agreement Terms Sheet ..................................................................................... 22 Appendix 2: Solomon Islands airports and airfields ................................................................................. 30 Appendix 3: Honiara International Airport asset description and condition assessment ....................... 33 Information Memorandum 2 6 August 2012 1. Introduction 1.1.
The Opportunity In December 2011, the SIG Cabinet approved Solomon Islands aviation sector reforms. The airport and airfield assets will remain in public ownership under a SIG owned Holding Company, Solomon Islands Airports Corporation Limited (“SI Airport Corporation”). The reforms seek the introduction of a suitably qualified private sector company (the “Concession Holder”) to manage and operate all of Solomon Islands’ airports and airfields under a long-­‐term commercial concession arrangement (the “Concession Agreement”) with SI Airport Corporation. Following consultation in March 2012, the SIG Cabinet approved proceeding with the non-­‐binding Expression of Interest (EOI) process outlined in the EOI tender documents that accompany this Information Memorandum. This Information Memorandum provides background information about Solomon Islands’ aviation sector, the proposed concession arrangement and the airport and airfield assets and operations to seek non-­‐binding expressions of interest in the concession arrangement opportunity. 1.2.
Expression of Interest (EOI) Process The EOI tender documents that accompany this Information Memorandum set out the terms and conditions of the EOI process. Recipients of this Information Memorandum are reminded that all questions and communications regarding this opportunity must be directed to: David Wright Project Director for Reform of Solomon Islands Aviation Sector Email [email protected] Recipients are not to contact any other person. The Solomon Islands Government is conducting the EOI process with the assistance of the New Zealand Government as part of the project for reform of the Solomon Islands Aviation Sector. The Solomon Islands Government is solely responsible for all decisions relating to the EOI process and as counterparty for all obligations arising under any resulting commercial arrangements. The New Zealand Government’s involvement is limited to the provision of technical support to the Solomon Islands Government in connection with the EOI process. No obligations, express or implied, are assumed by the New Zealand Government, nor any of its Ministers, employees, agents or advisors, whether such obligations relate to the EOI process, any resulting commercial arrangements, or otherwise. Neither the Solomon Islands Government nor the New Zealand Government, nor any of their Ministers, employees, agents or advisors makes any representation or gives any warranty as to the accuracy or completeness of any information it or they have or will provide in connection with the Information Memorandum 3 6 August 2012 EOI process. Neither the Solomon Islands Government, nor the New Zealand Government, nor any of their Ministers, employees, agents or advisors accept any liability on account of errors in any statements made or data provided in the course of response preparation, within the EOI itself or subsequent negotiations and each interested Respondent must rely on its own inquiries. The Solomon Islands Government (including, without limit, its Ministers, employees and agents) and the New Zealand Government (including, without limit, its Ministers, employees and agents) will not be directly or indirectly liable (whether in contract, tort or otherwise) for any damage, loss or cost arising from or in connection with this EOI. By participating in this EOI process, each Respondent waives any rights that it may have to make any claim against the Solomon Islands Government or the New Zealand Government. To the extent that legal relations between either of those Governments and any Respondent cannot be excluded as a matter of law, the liability of each of the Solomon Islands Government and the New Zealand Government is limited to $1. 2. Solomon Islands and its aviation sector 2.1.
Solomon Islands Solomon Islands are the second largest island group within the Pacific Islands. It consists of several hundred islands stretching over 1,500 kilometres in a south-­‐easterly direction from Papua New Guinea towards Vanuatu. There are six major islands with a constellation of approximately 900 smaller volcanic islands, coral atolls and reefs with more than 300 of them are inhabited. Major Islands are characterized by steep mountain ranges with dense tropical forests and are surrounded by extensive coral reefs. Solomon Islands has a total land area of 28,369 square kilometres with an Exclusive Economic Zone of 1.3 million square kilometres. The location of Solomon Islands is shown on the following map. Information Memorandum 4 6 August 2012 1
Further details on Solomon Islands can be found on the following website . 2.2.
People Solomon Islands enjoy a remarkable and diverse cultural population. Melanesians who make up roughly about 93% of the population inhabited most of the larger islands followed by Polynesians, 4%, the Micronesians, 1.5% and others at 1.5%. The 1999 census shows that Solomon Islands total population is approximately 450,000 with 25% of the population inhabiting the largest island, Malaita. An estimated 80% of the total population lives in rural areas with the remaining 20% residing in urban centres. Honiara is the capital city on the island of Guadalcanal with over 60% of urban residents. Solomon Islands population growth is considered as one of the highest internationally at over 3% per annum. Solomon Islands people speak more than 80 languages that reflect the country’s diverse cultural populations. English is the official language although with Pidgin as the lingua franca. Some 95% of the population are Christians. 2.3.
Government Solomon Islands was a British Colony until 1978 when it gained independence. The newly established country adopted its constitution with unicameral national parliament. However, Queen Elizabeth II was instituted and recognised as Head of State, represented by the Governor General. Solomon Islands is a democratic country with the national parliament comprising 50 members, elected for a four year term under the “first past the post” voting system. The Prime Minister is 1
http://www.welkamsolomons.com/index.html Information Memorandum 5 6 August 2012 elected from the leader of the majority party following legislative election or from the leader of the majority coalition. The Cabinet consists of 20 members appointed by the governor general on the advice of the Prime Minister from among the members of the forming government. The Governor General is the Head of State and is appointed by the monarch on the advice of Parliament for five years. By constitution, Members of Parliament are legislators. Each major island group within Solomon Islands elects a provincial assembly for a four-­‐year term. The Premier is the Chief Administrator of the provincial affairs who is elected from the leader of the majority party or coalition from members of the provincial assembly. The Deputy Premier is appointed by the speaker of the Assembly upon the advice of the Premier. Solomon Islands has nine provinces with each having their own Premiers. Provincial governments may enact ordinances that are only consistent to national legislations. 2.4.
Climate The country’s climate is equatorial usually moderated by the southeast trade winds from April to November and the northwest trade winds for the rest of the year. The country climate is conditioned to two seasons, the dry season (December to March) and the wet season (April to November). At daytime the equatorial climate temperature averages 29 degrees C and falling to 22 degrees at night-­‐
time. Average rainfall is approximately 3500 mm per annum. Economy-­‐ Key Facts2 2.5.
•
GDP (2010): $712 million. •
Annual growth rate (2010): 5.6%. •
Per capita income (2010): $1,357. •
Avg. inflation rate (2010): 3.0%. •
Natural resources: Forests, fish, agricultural land, marine products and gold. •
Agriculture: Products-­‐-­‐copra, cocoa, palm oil, palm kernels and subsistence crops of yams, taro, bananas, pineapple. •
Industry: Types-­‐-­‐fish canning, sawmilling, boats, rattan and wood furniture, fiberglass products, shell jewellery, tobacco, beer, clothing, soap, nails, handicrafts. •
Trade (December 2009): Exports-­‐-­‐$322.1 million: timber, fish, cocoa, copra, palm oil. •
Major markets-­‐-­‐China 50.2%, South Korea 5.7%, Thailand 3.3%, Japan 1.8%, Philippines 5.6%, Italy 3.4%, Spain 4.5%. •
Imports-­‐-­‐$305.5 million: mineral fuels, food, machinery and transport equipment, and basic manufactures. •
Major suppliers-­‐-­‐Australia 22.7%, Singapore 24.3%, New Zealand 4.9%, Fiji 4.4%, Papua New Guinea 4.3%, China 3.8%, Japan 3.1%. •
Average exchange rate (2009): U.S. $1 = SBD 8.05 2
Source: http://www.state.gov/r/pa/ei/bgn/2799.htm Information Memorandum 6 6 August 2012 2.6.
Economic Outlook The Solomon Islands’ economy is growing strongly. Gross Domestic Product (GDP) has doubled since 2003 with the Central Bank of the Solomon Islands (CBSI) estimating 2011 GDP growth exceeding 8%. Continued GDP growth is forecast in 2012. The major exported products of copra, cocoa, palm oil and kernel, fishing, logging and gold all grew in 2011. Formal employment continues to increase from a low base where some 80 per cent of working age people are engaged in non-­‐monetary (or subsistence) activities. The outlook is for continued strong economic activity driven by continued increase in exports. The Gold Ridge mine reopened in 2011 and further mining developments are anticipated from other minerals. Fish exports continue to increase. Agricultural commodity returns are expected to remain strong. Logging exports will ultimately be unsustainable. In addition, foreign visitor arrivals continue to grow as well as on-­‐going donor inflows that contribute to increased foreign exchange reserves currently estimated in excess of 10 months import cover. The Solomon Islands Government is working with external development agencies to broaden the sources of growth, improve the delivery of social services to the population, address the issues of poor transport infrastructure, high cost of utilities (electricity, water, gas and telecommunications) and improve the performance of its state owned enterprises. Further information can be found on the following websites listed in the footnote below3. 2.7.
Government Policy The National Development Strategy 2011 – 2020 supports “the development of air services and infrastructure to provide safe, efficient, and comprehensive domestic air services and meet the needs of international trade and tourism in a competitive and open market.” One strategy is stated as: “to reduce costs and increase efficiency, consider options for corporatisation of Honiara Airport, simplifying ownership and administration of rural airfields, privatisation of Solomon Airlines and management options for upper air space, implementing changes as necessary4.” The National Transport Plan 2011 – 2030 states that: “SIG is investigating options for attracting private sector finance into the airports sector, possibly by setting up a Solomon Islands Airports Authority, or through a public private partnership for Honiara International Airport5.” The proposed objectives of the reform are: 3
www.cbsi.com.sb; www.businessadvantagesolomons.com; http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/EXTEAPHALFYEARLYUPDATE/
0,,menuPK:550232~pagePK:64168427~piPK:64168435~theSitePK:550226,00.html 4
p. 35 National Development Strategy 2011 to 2020, Draft Final, July 2011 5
p. 11 National Transport Plan 2011-­‐2030 Final Draft, October 2010 Information Memorandum 7 6 August 2012 a)
Ensuring the safety and security of the aviation sector and its users; b)
Improved governance and management ensuring efficient operation of the airports; c)
Meeting expected service performance; d)
Affordable fees and charges; e)
Sustainability of key economic assets through effective asset utilisation providing earnings for maintenance, investment and development of airports and infrastructure; and f)
Minimise fiscal risk to the SIG. The experience of the Solomon Islands6 is similar to many Pacific nations namely: •
Limited economic capacity to fund aviation infrastructure; •
Limited capacity to develop and manage regulatory systems, including the monitoring and management of aviation safety and the negotiation of international agreements; and •
Long, thin airline routes that make it difficulty to sustain the quality and frequency of airline services required to support communities, tourism, and other needs. The introduction of a Concession Holder is intended to assist the SIG optimise the management of airports and airfields to overcome these difficulties and contribute to national economic development. 2.8.
Aviation sector structure The aviation sector functions of ministry oversight, airport operations and regulation of aviation safety and security are undertaken by the Ministry of Communication and Aviation (the “Ministry”) and the Civil Aviation Authority of Solomon Islands (the “Authority). An appointed public servant known as the Permanent Secretary heads the Ministry. The Ministry supports the Minister of Communication and Aviation and undertakes the functional roles providing policy advice to the SIG as well as currently managing airport operations, facilities, equipment, maintenance and development. The Authority is established under the Civil Aviation Act 2008 (the “Act) and consists of the Attorney General or nominee, the Permanent Secretary for the Ministry or nominee, and a member who is a director general or chief executive officer or equivalent of a civil aviation authority of a member state of the International Civil Aviation Organisation (“ICAO”) [section 9 (1) (a), (b) (c)]. The Authority is headed by the Director of Civil Aviation (the “Director”) which is a statutory position appointed by the Minister on the recommendation of the Authority [section 15]. The functions of the Authority are prescribed in the Act and are broadly to control the safety and security of aviation in the Solomon Islands. The Act appears to provide adequate regulatory provisions without the need for legislative amendment. 6
“Oceanic Voyages: Aviation and Shipping in the Pacific” Asian Development Bank Information Memorandum 8 6 August 2012 3. Aviation operations 3.1.
Introduction There is one international airport in Solomon Islands at Honiara and seven other airports that are in Government ownership. The remaining airports are in community or customary ownership and the Ministry administers arrangements that maintain scheduled flights into these airfields. The airports and airfields are detailed in Appendix 2: Solomon Islands airports and airfields. 3.2.
Airport traffic flows7 An estimated 155,244 passengers (international, domestic and transit) travelled through Solomon Island airports on 7,904 scheduled flight movements during 2011. In addition, non-­‐scheduled charter flights add a further unknown number of passenger and aircraft movements. Passenger numbers have shown steady growth over the past decade from 71,696 passenger numbers in 2002 to a forecast 161,540 passenger numbers in 2012 and growth is anticipated to continue to increase over the next decade with the introduction of additional aircraft capacity and growth in tourism. This growth may well be tempered by fewer non-­‐scheduled charter flights in the future. Table: Estimated Solomon Island passenger movements (2000 – 2012) Calendar Total Year international International International International arrivals departures transit Domestic Total passengers passengers passengers 2000 11,155 3,380 3,775 4,000 53,325 64,480 2001 10,190 2,620 3,070 4,500 31,140 41,330 2002 16,607 6,052 5,555 5,000 30,889 47,496 2003 43,265 18,913 18,852 5,500 42,789 86,054 2004 52,182 23,252 22,930 6,000 49,699 101,881 2005 56,539 24,843 25,196 6,500 45,899 102,438 2006 59,933 26,405 26,528 7,000 40,975 100,908 2007 60,888 26,892 26,496 7,500 50,291 111,179 2008 58,510 25,255 25,255 8,000 51,815 110,325 2009 74,225 32,533 33,192 8,500 56,522 130,747 2010 84,486 38,108 37,378 9,000 63,797 148,283 2011 92,659 41,649 41,510 9,500 62,585 155,244 2012 (est) 97,380 43,931 43,949 9,500 64,161 161,541 7
Traffic flows include passenger numbers, aircraft movements and freight tonnage Information Memorandum 9 6 August 2012 The growth in passenger numbers is illustrated in the following graph. Solomon Islands Passenger Numbers 120,000 Number 100,000 80,000 60,000 40,000 20,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (est) Year Total internasonal passengers Domessc passengers Solomon Islands has one international airport located some 10 km outside of the capital city of Honiara. Three airlines will operate some 624 scheduled international services during 2012 into Honiara. Current operations are as follows. •
Solomon Airlines operates four return services per week from Brisbane utilising an Airbus A320-­‐211 aircraft with a capacity of 136 passengers; •
Solomon Airlines commenced one weekly return service to Port Moresby and one return service to Nadi in April 2012 utilising their A320 aircraft; •
Pacific Blue operates two return services a week from Brisbane utilising a Boeing 737-­‐800 aircraft with a capacity of 180 passengers; •
Air Pacific operates one return service per week from Nadi via Port Vila utilising a Boeing 737-­‐
800 aircraft with a capacity of 180 passengers; and •
Air Niugini operates three return flights per week originating in Port Moresby to Nadi with a transit stop in Honiara utilising a Fokker 100 aircraft with a capacity of 98 passengers. International scheduled services currently operate on all days of the week. Two international services are currently scheduled to be at the airport at the same time on two days of the week; and for the other days only one service is scheduled to be on the ground at the same time. All scheduled services currently operate within daylight hours. Solomon Airlines will operate and estimated 6,700 domestic flight movements (i.e. sectors or landings) during 2012 currently servicing 23 airfields including Honiara (services are currently suspended or nil operations at a further five airfields) with three aircraft types as follows. Information Memorandum 10 6 August 2012 •
De Havilland Corporation Dash 8-­‐102 aircraft with a capacity of 36 passengers; •
De Havilland Corporation Twin Otters 6-­‐300 aircraft with a capacity of 18 passengers; and •
Britten-­‐Normand Islander BN-­‐2A with a capacity of eight passengers. Daily flights originate and terminate in Honiara typically with multiple sectors being flown of less than one hour in duration with the longest flight being 1 hour 55 minutes and the shortest sectors being 15 minutes (average flight time per sector: 49 minutes). Domestic services operate on each day of the week. In addition, a limited number of freight and charter services operate. Forecast fight movements during 2012 into the airports and airfields in shown in the following table. Flight movements per annum 2012 Total International arrivals 624 International departures 624 Domestic (landings) 6,656 total 7,904 4. Airport and airfield asset condition 4.1.
Overview of assets The airport and airfield assets will remain in public ownership. As a key part of the development of the proposed Reforms, Opus International Consultants Limited (“Opus”) was engaged to undertake a review of the airport assets in order to value the assets and review their condition in order to identify the essential capital expenditure. The airport assets valued by Opus included: •
Runway, taxiways and aprons •
Passenger terminal buildings (international and domestic) •
Navigation aids •
Other Government owned airport buildings and structures •
Airfield drainage assets •
Utility assets (water, sewerage and storm water) •
Landside pavement areas (roads, car parks etc.) A standard asset condition grading approach was used by Opus, with condition based on scale of 1 to 5. On this scale grade 1 is Very Good, and 5 is Very Poor as described in the Table below. Information Memorandum 11 6 August 2012 Grade Label Description 0 No-­‐existent Asset absent or no longer required. 1 Very Good Sound physical condition, no work required. 2 Good Acceptable physical condition, only minor work required (if any). 3 Fair Significant deterioration evident, failure unlikely in near future but further deterioration likely. Work required but asset still serviceable 4 Poor Failure likely in short term. Substantial work required in short term, asset barely serviceable. 5 Very Poor Failed or failure imminent/safety risk. Major work or replacement require urgently. The Opus report concluded that most of the major assets are generally in fair to good condition. Optimised Depreciated Replacement Cost (ODRC) Methodology8 was used to value the assets. An Optimised Replacement Cost (ORC) of USD $55.9m (SBD $ 395.0m9) and an Optimised Depreciated Replacement Value (ODRV) of USD $32.3m (SBD $228.8m) was determined. Relevant to this overview and is to note that the Opus Report forecasts a 20-­‐year renewal cost to establish a minimum baseline value of the renewal of existing Solomon Island Airports assets. The full Opus valuation and condition assessment will be made available to short listed respondents to this EOI. 4.2.
Honiara International Airport Honiara International Airport (IATA: HIR, ICAO: AGGH) is the only international airport in the Solomon Islands – located 10 kilometres from the capital Honiara. The airport is capable of accommodating Boeing 767s. Cargo Facilities are provided by Solomon Airlines and include a bonded warehouse, aircraft maintenance, air conditioned storage, animal quarantine, fresh meat inspection, health officials, x-­‐
ray equipment, security for valuables, fumigation equipment, dangerous and radioactive goods. Passenger facilities include three check in desks, Café, VIP lounge (operated by Solomon Airlines), Duty Free Shop, Gift Shop, Tourist Help Desk, Currency Exchange Desk and Car Rental Booth. These retail and service facilities are leased to private sector companies. The Domestic terminal is 500 meters away from the International Terminal and has a café. A description and condition assessment of the airport assets is outlined in Appendix 3: Honiara International Airport asset description and condition assessment. 8
An approach to allocating the capital costs of a project under which the assets are valued to be equal to the price of building or buying a modern equivalent asset, depreciated to reflect the shorter remaining life of the existing assets. 9
USD/SBD exchange rate used; 7.06587 (February 2012 midpoint) Information Memorandum 12 6 August 2012 4.3.
Other airfields There are a number of other airfields that are owned by SIG include Munda, Seghe, Gizo/Nusatupe, Choiseul Bay (Taro), Ballalae, Fera, and Santa Gruz (Lata). The table below provides details of the assets at these locations. Major upgrades to Munda and Nusatupe airfields are currently underway. Component Munda Description Sealed runway, however in a poor condition. Length Width (m) (m) Area (m2) 1400 30 42,000 915 30 27,450 1100 25 27,500 900 25 22,500 1650 25 41,250 Has a small terminal building. RWY 07/25. Major rebuild of runway and associated infrastructure underway to create international all weather divert for Honiara Airport. Seghe Crushed Coral/ Grass runway. RWY 10/28. Gizo/ Nusatupe Crushed Coral. RWY 14/32. Runway rehabilitation and sealing of existing crushed coral strip under way. Choiseul Bay Crushed Coral runway lengthened and (Taro) upgraded in 2011. RWY 13/31. Ballalae Coral/ Sand. RWY 05/23. Fera Coral. RWY 18/36. 565 25 14,125 Santa Cruz Coral. RWY 06/24. 914 24 2,936 (Lata) 5. Airport and airfield functions to be provided by the Concession Holder 5.1.
Honiara international and domestic terminal services These functions are currently undertaken by the Ministry or by private companies under contract to the Ministry. The Concession Holder will assume these arrangements. 5.2.
Operation of air traffic services and air navigation systems The Ministry currently operates air traffic services and navigation systems. These functions are intrinsically linked with airport operations and will be managed by the Concession Holder. 5.3.
Airport rescue and fire fighting services The airport has a fire category rating of 7. Airport rescue and fire fighting services are currently provided by the Fire Service (part of the Royal Solomon Islands Police Force), using equipment Information Memorandum 13 6 August 2012 (buildings and fire trucks) funded by the Ministry. The fire service will still be responsible for staffing operations (at least in the short term), under the supervision and control of the Concession Holder. 5.4.
Aviation security service Airport security services are currently provided by a group of employees of the Ministry subject to the standards imposed by CAASI. Responsibility for providing this service will be assumed by the Concession Holder whilst remaining subject to the standards imposed by the Civil Aviation Authority of Solomon Islands (CAASI). 5.5.
Airport and airfield maintenance10 The Ministry currently undertakes these functions using either its own staff or contracted services. The Concession Holder will assume the current arrangements. 5.6.
Contracted services to provide ground-­‐handling services These functions are currently conducted by Solomon Airlines for all scheduled passenger services (Solomon Airlines, Virgin Australia, Air Niugini and Air Pacific). Solomon Island Terminal Services Limited, a private company has an agreement with the Ministry to also offer ground-­‐handling services, mainly for non-­‐scheduled services. These arrangements will be formalised with the Concession Holder under which a rental or fee is paid to the Concession Holder for the rights to provide such services. 5.7.
Contracted VIP and business airline lounge Solomon Airlines has funded the fit out of a business lounge (Belama lounge) within the departure area of the international airport. These arrangements will be formalised with the Concession Holder under which a rental or fee is paid to the Concession Holder for the rights to provide such services 5.8.
Retail concessions including duty free and tourist, café, banking, rental car etc. The current position is that private companies have lease agreements to provide a limited range of services. Lease Agreements have been sighted covering most of these retail concessions. These arrangements will be formalised with the Concession Holder under which a rental or fee is paid to the Concession Holder for the rights to provide such services. 6. The Concession Agreement 6.1.
Structure The Concession Agreement is the key agreement between the SIG, SI Airport Corporation and the Concession Holder under which a Concession Holder is appointed to manage and operate all the airports and airfields. The terms of the Agreement need to fully align with the objectives of 10
Excluding Development (capital) expenditure Information Memorandum 14 6 August 2012 improving efficient operations at the airport and airfields. The proposed terms of the Concession Agreement are outlined in this section. A 10-­‐year contractual term is suggested in order to provide sufficient duration for both parties. The Concession Holder will manage and operate airport activities at all of the government owned airfields and in addition will administer air service arrangements at the privately and community owned airfields. It is proposed that the Concession Holder will be paid a base fee for service (as determined by the EOI and RFP tender/ negotiation process) and will be responsible for payment of all operating and maintenance costs (Operating Cost Allowance). The Concession Holder will also collect and account to the SIG for all airfield revenues that it collects on behalf of SIG. The Concession Holder base fee for service structure shall be either as an agreed fixed amount, subject to inflation adjustment or on a “cost plus” open book basis. Alternative structures are invited for consideration as part of the EOI process. An Operating Cost Allowance is the amount required to meet the Concession Holder’s operating and maintenance costs. The Concession Holder will be responsible for funding any actual operating costs that exceed this amount, and retain any amount of the Operating Cost Allowance that is unspent. This creates the incentive to reduce such costs. The Operating Cost Allowance for the initial three years will be fixed as agreed during the tender/ negotiation process. It will be reviewed and reset every three years. The Operating Cost Allowance review will be conducted by the parties with the assistance of the Independent Expert Organisation on an open book basis having regard to historic costs in the prior period, projected costs for the next period and benchmarks. Any operating cost savings (i.e. actual costs are less than the Operating Cost Allowance) during the prior period will be shared 50/ 50 between the Concession Holder and the Operator in the following three year period. The arrangements will not be commercially viable without some on going SIG financial support, with the deficit between tendered operational fees and revenue being funded from the SIG consolidated funds. For these reasons it is proposed that the arrangements are structured with no requirement to pay the SIG a rental for the lease of the assets and that Solomon Island tax relief is given to the Concession Holder. This will avoid what would otherwise be a circular funds flow and will minimise the deficit to be funded from the SIG consolidated funds. The basic ‘fee for service’ arrangement and Operating Cost Allowance is proposed to be coupled with the ability for the operator to profit from introducing additional non-­‐regulated commercial activities. This is intended to provide “upside” opportunities as an added incentive to attract private sector operators and services that improve the experience for passengers using the airport facilities. The proposed arrangements are also designed to reduce sovereign and commercial risk for international operators. This is achieved by providing for payments in advance, certainty regarding Information Memorandum 15 6 August 2012 the minimum capital expenditure, a robust dispute resolution process, governance of Regulated Charges and Fees, a force majeure regime and early termination payments. Minimum service standards will apply to the Concession Holder, including provision of basic services, facilities and commercial operations and adherence to an agreed asset maintenance plan. A portion of the fee is to be performance related in order to create the proper incentives. The minimum service requirements and the key performance regime are designed to ensure service standards are appropriate and not compromised by the Concession Holder incentives to reduce costs and thus maximise its returns. Careful consideration will be required to establish minimum service standards and consultation requirements at private and community owned airfields to ensure that local communities do not become disenfranchised or have unrealistic expectations of payments from the Concession Holder once the Ministry is not longer involved in administering operations into these airfields. The Concession Holder will be obliged to provide these services for a prescribed amount of operating costs agreed during negotiations. This provides certainty of operational costs to the SIG, and incentivises the Concession Holder to increase efficiencies. As noted, the prescribed amount of operational costs will be reviewed and reset on a three yearly basis by agreement between the parties (and as arbitrated/ mediated by the Independent Expert Organisation). The Concession Holder performance review shall be undertaken annually on an “open book’ basis by the Independent Expert. The proposed Term Sheet is included as Appendix I Concession Agreement Terms Sheet. 6.2.
Capital Expenditure Three categories of capital expenditure are relevant under the Concession arrangement: •
Essential capital expenditure (funded by SIG) that must be undertaken to ensure the airports can operate over the 10-­‐year duration of the Concession; •
Optional commercial capital expenditure (funded by the Concession Holder or SIG by agreement) that the Concession Holder may choose to undertake in order to benefit from additional commercial activities (e.g. installing shop/ café etc.); and •
Optional capital expenditure (funded by SIG) that the SIG may wish to undertake over the 10-­‐
year term in order to improve the asset base or service (e.g. upgrading outlying airfields, constructing new outlying fields etc.). The essential capital works that are required to be undertaken over the 10-­‐year duration will be outlined in the Concession Agreement. These will be minimum works that ensure: •
International safety and security obligations are satisfied; •
Assets are replaced at the end of their economic life; •
Facilities meet appropriate standards for the travelling public and efficient operations; and Information Memorandum 16 6 August 2012 •
Some core assets are provided which can derive a commercial return on investment (e.g. car parking, retail shopping, and other commercial activities based on airport land etc.). These essential works will be agreed in the tender process/ negotiations with the Concession Holder who will be concerned that such key works are undertaken in order for it to operate the airports. This list will need to be finalised after consideration of the Opus Report by relevant SIG officials who also have similar lists of required works. The initial essential capital works will be outlined in the Agreement, with the programme revised annually by agreement between SIG and the Concession Holder or failing agreement, referred to the Independent Expert Organisation (as detailed below). In respect of commercial works, the Concession Holder will be obligated to provide for specified minimum commercial activities within the international and domestic passenger terminals. The Concession Holder will also have the option to undertake additional commercial activities at the airfields (such as additional shops/ car parking) and retain all revenues generated by such activities. The initial list of such optional activities is to be agreed as part of the tender/ negotiation process. The SIG should also benefit through the capital improvement programme and the commercial activities that will vest in the SIG at completion of the Agreement. If the SIG is unable to fund the airport improvements that relate to such activities, then the Agreement will provide for the Concession Holder to invest if it believes that a strong business case exists. Any such investment by the Concession Holder shall be agreed with the SIG (or failing agreement by the Independent Expert Organisation) and the Agreement will provide for the residual value of any investment in assets to be paid to the Concession Holder at the end of the Agreement. The last category of capital expenditure is money that the SIG may wish to invest over the 10-­‐year term in order to improve the assets -­‐ for example by sealing a dirt runway or constructing a new runway. The Concession Holder will be relatively neutral as to such works. Therefore, in order to benefit from the experience and expertise of the Concession Holder, it is proposed that any such works would be undertaken in consultation with and under the supervision of the Concession Holder. As noted below, the SIG National Transport Fund (NTF) would also play an important role in such works. 6.3.
Funding As noted, in relation to the Concession Agreement, SIG funding will be required in order to cover: •
The base fee for service payable to the Concession Holder (as agreed during the tender process/ negotiations); •
Essential capital expenditure (as with the Concession Model) identified under a long term plan and funded from the NTF; and •
Other SIG capital expenditure in the context of the Concession Agreement) which has been considered in the context of the wider NTF and prioritised accordingly. Information Memorandum 17 6 August 2012 6.4.
Employees The Ministry’s current staffing (excluding Communications but including CAASI positions which are currently funded from the recurrent budget) is detailed in the following table. Division Headquarters and Administration Accounts CAASI Civil Aviation Operations Branch (Air traffic control) Aviation Security Aviation Aeronautical Engineering (Navcom/Navaids) Airport Management Services Total Established Positions Positions currently filled 7 8 5 4 6 5 1 0 37 36 41 41 11 11 30 31 130 136 The best approach to employees will need to be considered and discussed as part of the tender/ negotiation. Ministry and SI Airport Corporation role The Responsible Ministry overseeing aviation will continue to advise on policy and be involved in oversight of the Concession Agreement -­‐ performing a contract management/ supervision role. SI Airport Corporation will have the very limited function as a Holding Company owning the assets. With a Concession Agreement in place, it does not require any management staff with any required secretariat services being provided from within the Responsible Ministry. 6.5.
Independent Expert Organisation An organisation is proposed to be appointed to annually review performance of the Concession Agreement and to mediate and arbitrate any disputes that may arise under the Concession Agreement. The same organisation is proposed to be involved in advising the Minister of Finance on the appropriate level of fees and charges. Rather than the Independent Expert Organisation being involved on an ad hoc basis, it is proposed that an organisation be retained for a term of three years which will enable the organisation to become familiar with the arrangements and issues -­‐ enabling continuity and more speedy and robust resolution of differences between the parties. An international tender would be conducted to engage the Independent Expert Organisation. It is envisaged that the Independent Expert Organisation will undertake the performance review of the Concession Holder contract/ SI AIRPORT CORPORATION annually on an “open book” basis. 6.6.
Ministry of Infrastructure Development role The Ministry of Infrastructure Development administers the National Transport Fund (NTF) and a process for determining the priority of infrastructure expenditure across all transport sectors. It is Information Memorandum 18 6 August 2012 anticipated that the SIG will use this structural arrangement to determine the list of essential capital expenditure required, and other optional capital expenditure that is prioritised, to be undertaken by SIG during the term of the Concession Agreement. The NTF will assume responsibility for approving the funding and work plan at the appropriate times. Performance of the essential works could be undertaken by the Concession Holder or contracted to a third party under the supervision of the Ministry of Infrastructure Development depending on specific circumstances. 7. Doing business in Solomon Islands 7.1.
Introduction Solomon Islands are one of the few Island nations that offer real potential investment opportunities in many productive economic sectors. The investment climate since 2004 has been improving and has shown signs of stability due largely to the following outcomes. 7.2.
Legislative requirements The SIG recognises the importance of foreign investment in the economic development of Solomon Islands has instituted certain reforms aligned to encouraging foreign investment. One of these is the introduction of the new Foreign Investment Act 2005 and Regulation 2006. The essence of this new law provides a simplification and abolition of some of the various impeding regulatory and administrative requirements to foreign investment. It also provides for greater foreign investors' participation in the country's economic development. The SIG views foreign investors as important partners in the development of the country's economy. With its vast natural resources, foreign investors have plenty of choices to engage their productive resources in areas like fisheries, forestry, agriculture and tourism. With the introduction of the new investment act 2005 and regulation 2006, the facilitation of foreign investment will now be more transparent, easy to manage and definitely will give confidence to those who want to invest in the country. Foreign Investors are assured that doing business in Solomon Islands is safe, free from political interference and although challenging, benefits are comparable to or better than most of the Island nations. The Foreign Investment Act 2005 regulates the requirements for a foreign company. They must have approval from the Foreign Investment Division of the Ministry of Commerce. A Certificate of Registration is the prerequisite for negotiating or entering into any arrangement or agreement in respect of an investment opportunity. The requirements including application forms are available on line and outlined on the websites detailed below11. 11
http://www.commerce.gov.sb/Divisions/Investment/about_fid.htm ; and http://www.investsolomons.gov.sb/node/1 Information Memorandum 19 6 August 2012 The Solomon Islands government levies income tax, sales tax, custom and excise duties, stamp duty and export tax. The Commissioner of Inland Revenue is generally responsible for the administration of these taxes. The controller of the Custom and Excise also has some significant responsibilities in specific areas. Solomon Islands tax principle indicates that resident persons including companies are taxed on their worldwide income. Non-­‐resident persons including companies are taxed on their income that accrues, is derived or is received from Solomon Islands. A tax year is the calendar year although businesses can make adjustment for an alternate accounting period. Taxation requirements are legislated for in the Income Tax Act 1965 and details on taxation requirements are outlined on the Solomon Islands Inland Revenue Department website detailed below12. The International Monetary Fund also publishes a Solomon Islands Tax Summary and Statistical Analysis. The most recent information was published in November 2008 and can be found on the following website13. The Companies Act 2009 establishes the framework for establishing, administering and winding up trading companies. Further details on Solomon Islands legislation can be found on the following website detailed below14. 7.3.
World Bank ranking Solomon Islands’ global ranking leapt forward seven places between 2010 and 2011 in a new report from IFC and the World Bank15 that measures the ease of doing business. Jumping to 74th out of 183 economies, Solomon Islands was among just four countries in East Asia and the Pacific – also including Tonga and Vanuatu -­‐ which improved in three or more areas measured by the report. 12
http://www.ird.gov.sb/Front/Front.aspx?ID=471 http://www.imf.org/external/pubs/ft/scr/2008/cr08359.pdf 14
http://www.paclii.org/ 15
D oing Business 2012: Doing Business in a More Transparent World assesses regulations affecting 13
domestic firms in 183 economies and ranks the economies in 10 areas of business regulation, such as starting a business, resolving insolvency, and trading across borders. This year, the rankings on ease of doing business have expanded to include indicators on getting electricity. http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/PACIFICISLANDSEXTN/0,,cont
entMDK:23028067~pagePK:1497618~piPK:217854~theSitePK:441883,00.html?cid=3001_147 Information Memorandum 20 6 August 2012 8. Appendices Information Memorandum 21 6 August 2012 Appendix I Concession Agreement Terms Sheet Item 1 Heading Parties Provision The Solomon Islands Government (SIG). Solomon Islands Airport Corporation Limited (SI Airport Corporation). The Concession Holder-­‐ as selected by tender process. 2 Background The SIG is undertaking aviation sector reforms to support economic development in Solomon Islands through stimulation of tourism, trade and creation of local employment opportunities. A key aspect of the sector reforms is the introduction of private sector involvement from an experienced manager and operator of airport infrastructure. The Concession Holder is an experienced manager and operator of airport infrastructure and has been appointed to manage and operate all of the SIG owned airports and airfields in the Solomon Islands and to undertake the SIG’s functions in respect of the private and community owned airfields. The relevant airports and airfields are described in the Schedule (Airfields). 3 Objectives The objectives of the parties are to: •
•
•
•
•
4 Ensure the safety and security of the airport operations at the Airfields meeting all international and Solomon Island regulations and requirements; Manage and operate the Airfields in an efficient manner against an agreed strategy and plans; Meet service level performance objectives and the expectations of the SIG and community; Manage the Airfields’ assets in a manner which optimises their economic life, ensuring all necessary repairs and maintenance are undertaken in a timely and efficient manner; and Liaise with SIG regarding capital expenditure programme. Term, Commencement Term: 10 years or by negotiation. Date, Transition Commencement Date: Immediately upon execution of agreement. Transition: The parties will work together to transition management of the Airfields to the Concession Holder no Information Memorandum 22 6 August 2012 later than six months after commencement of the Agreement. See “Transition Phase” below. 5 Conditions Precedent Conditions to be satisfied prior to entry into the Agreement are: •
•
6 Services Information Memorandum The Concession Holder registering the company to do business in the Solomon Islands and undertaking all associated registrations and filings; and The SIG granting SI tax relief for Concession Holder. Concession Holder is to fully manage and operate the Airfields, which services includes: •
Honiara international and domestic terminal services; •
Operation of air traffic services and air navigation systems; •
Administration of airport rescue and fire fighting services; •
Provision of aviation security service; •
Airfield maintenance; •
Contracting outsourced airline ground handling services (optional and not exclusive); •
Contracting outsourced air freight terminal services (optional and not exclusive); •
Contracted outsourced airline business lounge; •
Contracted outsource retail and service concessions; •
Providing the minimum facilities and commercial activities as set out in the Schedule (All facilities and equipment required by CAASI; At International: Shop/ Canteen/ Banking facilities/ Toilets/ Runway etc. & At Domestic: Canteen, Toilets, Check –in desks etc.) [Comprehensive lists to be developed for each Airfield and included in Schedule]; •
Optional services as provided for in the Schedule which may be added to or removed during the Term of this Agreement; •
Collecting all Regulated Fee revenue generated by the Airfields and accounting to SIG for such revenue on a monthly basis; •
Undertaking all necessary maintenance and repairs to the Airfields in accordance with the Asset Maintenance Plan; •
Minimum service standards and consultation requirements at private and community owned airfields to ensure that local communities do not become disenfranchised or have unrealistic expectations of payments from the Concession Holder 23 6 August 2012 •
•
•
•
•
once the Ministry is not longer involved in administering operations into these airfields [Specific services required for community/private airfields to be included in schedule]; Employing and engaging all necessary personal and contractors; Managing the Essential Capital Expenditure and Optional Capital Expenditure (at the cost of SIG as detailed below); Undertaking the Optional Commercial Activities (if the Concession Holder so elects as detailed below); Preparing the required Plans and Accounts; and Otherwise performing its obligations set out in this Agreement; The Concession Holder is responsible for all the costs and expenses of providing these Services. 7 Service Standards All Services are to be provided to a standard of a reasonable prudent airport operator. All Services are to meet the minimum standards set by the Key Performance Indicators. All services must comply with the safety and security requirements of CAASI and all other applicable laws and regulations. 8 Key Performance Indicators A set of KPIs will be included in Schedule and agreed as part of the tender process. The KPIs will relate to matters such as: •
•
•
•
•
•
•
•
•
Maintenance and operation of a secure, safe and efficient airport; Provision of comfortable and friendly environment to passengers and visitors to the airport; Meeting recognised international operating standards; Provision of efficient services to airline operators; Financial and reporting obligations including accounting for revenue collected on behalf of SIG; Improvement to airport and airfield facilities; High standard of cleanliness and maintenance of facilities; Response to enquiries; and Working with all stakeholders [Drafting note: KPIs will be developed in consultation with airline operators] The KPIs will provide levels of performance in respect of which Incentive Payments can be calculated and minimum Information Memorandum 24 6 August 2012 standards, below which penalties will apply. 9 Service Fees The Concession Holder will be paid an annual Service Fee (as agreed during the tender process). The Service Fee will be subject to adjustment to reflect performance against the key performance indicators. The Service Fee will be payable by the SIG six monthly in advance, with adjustments following the KPI performance review. The Service Fee will be payable in the currency of the Concession Holder. 10 Operating Cost Allowance An Operating Cost Allowance is the amount required to meet the Concession Holder’s operating and maintenance costs. The Concession Holder will be responsible for funding any actual operating costs that exceed this amount, and retain any amount of the Operating Cost Allowance that is unspent. The Operating Cost Allowance for the initial three years will be fixed as agreed during the tender/ negotiation process. It will be reviewed and reset every three years. The Operating Cost Allowance review will be conducted by the parties with the assistance of the Independent Expert organisation on an open book basis having regard to historic costs in the prior period, projected costs for the next period and benchmarks. Any operating cost savings (i.e. actual costs are less than the Operating Cost Allowance) during the prior period will be shared 50/ 50 between the Concession Holder and the Operator in the following three year period. 11 Relationship with Civil Aviation Authority of The Concession Holder will make available all facilities, equipment and services as required by CAASI. Solomon Islands (CAASI) 12 Transition Phase During the first six months of the Agreement: •
•
•
•
13 Capital Expenditure Three categories of capital expenditure are relevant under the Concession Agreement: •
Information Memorandum [Employee transition provisions]. Relocating the Ministry’s current offices from the Airfields. Governance and Reporting procedures will be established. [Drafting note: and any other initial phase matters to be determined]. Essential Capital Expenditure (funded by SIG) that must be undertaken to ensure the airports can operate over 25 6 August 2012 •
•
the 10-­‐year duration of the Concession. Optional Capital Expenditure (funded by SIG) that the SIG may wish to undertake over the 10-­‐year term in order to improve the asset base or service (e.g. upgrading outlying airfields, constructing new outlying fields etc.). Optional Commercial Capital Expenditure (funded by the Concession Holder or SIG by agreement) that the Concession Holder may choose to undertake in order to benefit from additional commercial activities (e.g. installing shop/ cafe). A rolling three-­‐year Capital Investment Programme will be agreed each year. 14 Asset Maintenance Plan A rolling three year Asset Maintenance Plan will be agreed each year The initial Asset Maintenance Plan is to agreed as part of the tender process and attached as a schedule to the Agreement The Asset Maintenance Plan will outline the maintenance and repairs to the Airfields required to be undertaken by the Concession Holder 15 Optional Commercial Activities by Concession Holder The Concession Holder has the option to undertake additional commercial activities at the airfields (in addition to the minimum commercial activities included as Services) and retain all revenues generated by such additional activities. The initial list of such Optional Commercial Activities will be agreed as part of the tender process and is attached as a schedule to the Agreement. The Concession Holder may propose any further activities at any time during the agreement and SIG will approve them unless it can show that such activities compromise the future operation of the relevant Airfield. The Concession Holder will be responsible for all the costs of Optional Commercial Activities and retain all income generated by such activities. Capital assets associated with the Optional Commercial Activities shall be either: •
•
Information Memorandum funded and owned by SIG and the commercial activities may be undertaken by SIG upon termination of the Agreement; or funded and owned by the Concession Holder and a Residual Asset Value paid to the Concession Holder by SIG at the completion of the Term of the Agreement. Any investment made by the Concession Holder shall require 26 6 August 2012 the approval of the Regulator including determination of the methodology to determine Residual Asset Value. 16 Governance and Monitoring SIG will appoint an Independent Expert organisation to monitor performance of this Agreement. The Independent Expert will conduct an annual review and audit of the Concession Holders’ performance. The annual review and audit will be conducted on an “open book” basis. Each party will nominate two people to be its representative in all dealings concerning this Agreement. The representatives will meet not less than monthly. 17 Independent Expert Organisation An organisation is to be appointed by SIG to annually review performance of the Concession Agreement and to mediate and arbitrate any disputes that may arise under the Concession Agreement. The same organisation is proposed to be involved in advising the Minister of Finance on the appropriate level of fees and charges (as noted below). Rather than the Independent Expert being involved on an ad hoc basis, an organisation will be retained for a term of three years which will enable the organisation to become familiar with the arrangements and issues -­‐ enabling continuity and more speedy and robust resolution of differences between the parties. An international tender would be conducted to engage the independent expert organisation. 18 Status of Concession Holder At all times, the Concession Holder must be certified to operate aerodromes under Solomon Islands Rule Part 139 or equivalent foreign certification. 20 Reports and Accounts Monthly operational Reports. Accounts for Regulated Fees (with supporting data). KPI performance Reports. Rolling 10 year Asset Maintenance Plan. Capital Expenditure progress Reports. Optional Commercial Activities progress Reports. 21 Record Keeping & Access to information Concession Holder is to maintain all records relation to Airfield operations. SIG is to have open access to all operational and financial information relevant to the Airfields. Information Memorandum 27 6 August 2012 22 Liquidated Damages [Drafting note: LD regime for failure to meet KPIs minimum standards to be developed] 23 Default [Drafting note: Standard default regime to be included] Specific performance to be acknowledged as a suitable remedy. 24 Termination by SIG SIG may terminate the Agreement if: •
•
•
Prolonged breach by Concession Holder (e.g. failing to meet Service standards); The organisation fails to have the management and financial expertise to operate the airports and airfields safely and efficiently within accordance with the Civil Aviation Act 2008, the Solomon Islands Rules system and relevant International Civil Aviation Organisation (ICAO) Standards and Recommended Practices (SARPS); Concession Holder insolvency etc. In the event of such termination, a termination fee is payable by the Concession Holder to the SIG equal to one years’ Service fee. 25 Termination by the Concession Holder may terminate the Agreement if: Concession Holder •
•
Payment default by SIG; Prolonged breach by SIG (e.g. failing to make required Capital Investment). In the event of such termination, a termination fee is payable by SIG to Concession Holder equal to six months’ Service fee 26 Provisions applicable on Termination Concession Holder to assist with hand back and migration of operations to SIG. Concession Holder to transfer all records to SIG. 27 Limitation of liability Concession Holder’s liability capped at 200% of Service Fee. 28 Dispute Resolution Disputes are to be resolved in the first instance by the Representatives. Unresolved disputes will be escalated to a the Independent Expert. 29 Force Majeure The Concession Holder will be relieved from responsibility during prolonged force majeure events. 30 Ownership of Assets and SIG (via SI Airport Corporation) and Communities will continue to own their respective Airfield assets. Access SIG (via SI Airport Corporation) grants unrestricted access to the Concession Holder who in turn will provide reasonable access to SIG. Information Memorandum 28 6 August 2012 The Concession Holder shall own any assets invested in by the Concession Holder with ownership being assumed by SI Airport Corporation at the completion of the Term of this Agreement as provided for in clause 14. 31 Insurance SI Airport Corporation is to insure the Airfields’ assets on a replacement cost or best industry practice basis. All insurance premiums will be met by SI Airport Corporation. 32 Representations and Warranties Concession Holder is entering into Agreement in reliance of its own judgement-­‐ no reliance on SIG. Standard reps and warranties regarding existence/ ability to contract etc. 33 Governing Law Solomon Islands 34 Standard Provisions 35 Definitions & Interpretation (a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
Schedules Confidentiality. Compliance with all laws. Subcontracting. Assignment. Announcements. Entire agreement. No partnership/agency/joint venture. No waiver. Variation to be in writing. Notices. Costs. Information Memorandum 29 6 August 2012 Appendix 2: Solomon Islands airports and airfields Source: Solomon Islands Airlines Information Memorandum 30 6 August 2012 Air Code Owner Operational Current Capital Works (2) (3) Status (1) Honiara HIR SIG Yes International and domestic flights Munda MUA SIG Yes Runway rehabilitation and extension of existing sealed runway to create international alternate aerodrome to HIR Installation of Non-­‐Directional Beacon (NDB) to meet minimum standard requirements under ICAO Annex 14 Seghe EGM SIG Yes Upgrading of airstrip to meet minimum standard requirements under ICAO Annex 14 Gizo/Nusatupe GZO SIG Yes Runway rehabilitation and sealing of existing crushed coral strip Choiseul Bay CHY SIG Yes Installation of Non-­‐Directional Beacon (NDB) (Taro) to meet minimum standard requirements under ICAO Annex 14 Ballalae BAS SIG Yes Fera FRE SIG Yes Santa Gruz SCZ SIG Yes Upgrading of airstrip and installation of Non-­‐
(Lata) Directional Beacon (NDB) to meet minimum standard requirements under ICAO Annex 14 Rennell RNL Community Yes Installation of Non-­‐Directional Beacon (NDB) to meet minimum standard requirements under ICAO Annex 14 Bellona BNY Community Yes Auki AKS Community Yes Kirakira IRA Community Yes Avuava AVU Community No Upgrading of airstrip to meet minimum standard requirements under ICAO Annex 14 nil operations Atoifi ATD Community Yes Yandina XYA Community No service suspended Arona RNA Community Yes Santa Anna NNB Community Yes Information Memorandum 31 6 August 2012 Afutara AFT Community Yes Marau RUS Community Yes Suavanao VAO Community Yes Ramata RBV Community Yes Kaghau KGE Community Yes Mbabanakira MBU Community No nil operations Gatokae GTA Community Yes Batuna BPF Community Yes Jajao JJA Community No nil operations Nana NNA Community No service suspended Mono MNY Community No (1)
Operational status for domestic flights by Solomon Airlines effective 26 March 2012 (2)
[Installation of Non-­‐Directional Beacon (NDB) to meet minimum standard requirements under ICAO Annex 14 planned at Ontong Java, also known as Lord Howe Atoll some 250 km north of Santa Isabel Island. (3)
Construction of two new airstrips planned at Manaoba (Malaita Province) and Lomlom (Temotu Province) Information Memorandum 32 6 August 2012 Appendix 3: Honiara International Airport asset description and condition assessment 1.
Pavement assets Runways The airport has one asphalt runway; the runway is 2,363 m in length and 45 m wide. This provides a total area of 106,335m2. The runway was overlaid in 2005 with 100mm asphalt overlay and is in a good overall condition. There was little information available to establish the exact depth of the runway pavement however the below final design cross section gives a good indication of runway/ taxiway and apron total depth of 580mm from extension works done in 1984. There is an old runway which 900m long by 45m wide with total area of 40,500m2. This section of the runway is no longer used and is in poor condition. This length could be used as the runway base for a future for extension. Based on existing pavement structure and expected loadings, the following life expectancies have been assumed; the upper surface of the asphalt pavement is assumed to have an average life of 12.5 years; the lower asphalt layer and the base course layer are assumed to survive four overlay cycles (60 years).; the sub base is expected to last two base course cycles (80 -­‐ 120 years); and the formation is assumed to be non-­‐depreciable. Grassed areas are assumed to be non-­‐depreciable. Taxiways There are four asphalt taxiways (A, B, C, and D) that provide access to the international and domestic terminals. The international taxiway (A) is 260m long and 37m wide with a total area of 9,620m2. The taxiway has an estimated depth of 1050mm. The taxi way is in a good condition. The domestic taxiways in use (B and C) have a combine length of 157m and 24m width. This provides a total area of 3,768m2. They are in good condition. Taxiway D is not currently in use, it has a length of 195m and width of 14m and area of 2,730m. Aprons and frontage There are two designated aprons. The international apron is 70m in length and is 126m wide with an area of 8,820m2 it has a large concrete patch repair. The apron was constructed 1050mm depth in 1997 as part of the international airport development. The apron is in a poor condition and will required renewal/ overlay in the next few years. Concrete could be used for the renewal of the apron in areas where there is likelihood of fuel spillage from parked aircraft (aviation fuel tends to soften and damage bitumen based materials). Concrete could also be used at each end of the runway, as it provides superior strength characteristics to cope with the high lateral wheel loads. Information Memorandum 33 6 August 2012 For the international apron areas, is assumed to have a base life expectancy of 15 years and residual value of zero. The underlying base course/sub base layers are assumed to survive a double cycle, having a base life expectancy of 30 years. The domestic apron is 70m long by 256m wide with a total area of 17,920m2. The domestic apron is in a fair condition. The apron areas are assumed to have a base life expectancy of 25 years and residual value of zero. The underlying base course/sub base layers are assumed to survive a double cycle, having a base life expectancy of 70 years. Internal access roads In general the internal roads are constructed of crushed rock base course with a gravel surface. The main access road is a single lane carriageway, and is considered optimal for the current traffic demand. The remaining roads are service roads of suitable capacity to service the present needs of the airlines, the airport management and tenants. The total pavement (total length 560m and width 6.0m, with a total area of 3,360m2) information comes an onsite measure up. Pavement thicknesses have been based on typical designs for particular use categories. There is an old internal access road that is no longer used. 2.
Other airside assets Pavement markings The pavement markings on the runway, taxiways and aprons are all in very poor condition and remarking has not been completed since 1997. They are all beyond their economic and useful life and remarking is required. Lighting The airport has simple approach and runway lighting. The Airport Information Plan describes the lighting as PAPI 3 degrees – left hand Side MEHT 14.5m, RWY Edge, Threshold lighting, TWY edge lighting, Apron Flood Lighting, ABN FLG White/ Green, and standby power 10 seconds. The lights were identified on site and quantities were established using as-­‐built drawings. The various lights and quantities are shown in the following table. Component Description Quantity International Apron High Towers 8 x 150W flood light high tower 3 Domestic Apron High Towers 4 x 150W flood light high tower 3 Taxiway Lights Blue taxi-­‐way lighting 77 Turning Pad Edge Lights Blue 45W, BPE-­‐2-­‐150-­‐Blue 6 Runway Inset Lights 105W x 2, FED-­‐2-­‐200-­‐Y/CM-­‐R-­‐I-­‐O 5 Threshold Lights 105W x 3, Green/Red, FTE-­‐2-­‐300-­‐G/R-­‐R-­‐
II-­‐0 12 Information Memorandum 34 6 August 2012 Component Description Quantity Approach Lighting Assumed same as below 31 Approach Lighting White, 150W, UEL-­‐1-­‐150-­‐C-­‐2-­‐Y-­‐0 25 Runway Edge Lights 150W White/Yellow, BPE-­‐2-­‐150-­‐Y/C, incl. 2x2 concrete pad 67 Precision approach path indicator 200W x 2 8 Illuminated Wind Direction Indicator White light 50W, 3m high pole and sock 2 Perimeter fences The condition of the fence varied based on the type and age. The old concrete post perimeter fences at either end of the runway are in poor condition and will require renewal within the next 5 years. Drainage Drainage is generally in good condition. 3.
Landside pavement assets International terminal access roads The internal roads at the international terminal are constructed of crushed rock base course with an asphalt surface. The main access road is a dual lane carriageway, and is considered optimal for the current traffic demand. The remaining roads are service roads of suitable capacity to service the present needs of the airlines, the airport management and tenants. The total area of the internal access road is 454m2. The roads are in a fair condition with some minor potholes that require repair. The roads were constructed in 1997 and there has been no further treatment since, a part from general routine maintenance. International terminal car park There are currently 96 car parks available at the international terminal. The total area of the car park is 3,600m2. The car park was in a poor condition. The recent lighting installation has damaged the car park and repairs are required. There are currently no pavement markings defining individual car parks and gardens are somewhat overgrown. There is a very simple drainage system for the international terminal road and car park it consist of a concrete slot drain the length (214m) of the international terminal building and all other surface water drains into a land drain system on the road frontage which appear to be adequate for the current facility. There are underground storm water drains for the building. Domestic terminal access roads / car parks / drainage In general the internal domestic roads and are constructed of sand/ local crushed rock and have gravel/ partly sealed surface. The main access road is a single lane carriageway, and is considered optimal for the current traffic demand. The total area of car park is not under-­‐capacity given the current and short-­‐term demands. The road and car park are currently in a poor condition. There has Information Memorandum 35 6 August 2012 been recent drainage improvement work and there is more work planned to improve the current condition of the road/ car park and drainage facilities. Other landside assets There are a number of sundry assets on the landside of the international and domestic terminal buildings including monuments, landscaping, traffic facilities, lights, rubbish bins, fences, gates, poles, and other buildings. 4.
Airside building assets International terminal building The international terminal building is a two-­‐storey structure with an approximate footprint of 5318m2. The structure consists of steel portal frames with timber cladding. The building was constructed in 1997 during a redevelopment of the airport. The ground floor of the building has arrival and departure facilities. This includes luggage handling facilities, passenger security screening facilities, border control, transit passenger facilities and small shops. The first floor of the structure contains approximately 252m2 of offices currently occupied by the Ministry of Aviation and Communication. These offices will be available for the on-­‐going airport management. There is also a viewing deck (400m2) that runs half the length of the building on the apron side of the terminal; the platform is accessed externally via stairs at one end. Domestic Terminal Building The domestic terminal building was constructed ca.1975. It is a single storey structure with an approximate footprint of 1254m2. The building is constructed from masonry block walls and timber framing. A number of renovations and reconfigurations to the building have occurred during its life. The domestic terminal contains domestic arrival and departure facilities, meteorological services, navigational equipment, aviation services, small shops and cafes. Parts of the terminal have been recently re-­‐roofed and at the time of the site visit extensive work was been undertaken to install the newly purchased navigation equipment. Fire Station The fire station was constructed c.2008, and it consists of steel portal frames with long run cladding. The building contains a four bay workshop for storage of the fire trucks and fire fighting equipment. Ground floor and offices and storage are located at one end of the building, together with a raised two-­‐storey office section. Hanger The hanger, which is currently occupied by Solomon Airlines, was constructed c.1975. Further alterations were completed as recently as 2010. The hanger is approximately 924m2, with the majority of the ground floor area taken up by workshop, with some offices and storerooms along the back wall of the hanger. Information Memorandum 36 6 August 2012 Blue Training Room There is one airside training room that is used for training of staff on site. The building was constructed ca.1975 and is approximately 50m2. The building is timber framed and is seated on steel piles. The building has a number of air conditioning units, fans and lights. The building is in a poor condition. Control Tower The control tower is located between the domestic terminal and the hanger. The tower was constructed in 1987 and is constructed from masonry blocks with a pre-­‐made steel observation room atop. The structure has a footprint of approximately 10m2, although the observation room overhangs the building footprint. The tower is in a poor condition. Terminal Systems The international terminal contains a number of systems to assist with passenger arrival and departure. The international terminal has a baggage conveyor belt, baggage scanners and baggage scales. The airport has an on-­‐site weather station that is used to give forecasts for the airport. The Ministry of Environment, Conservation and Meteorology also have an on-­‐site weather office, which is housed in the domestic terminal. 5.
Landside building assets Operations Offices The operations offices are located at the western end of the international terminal building. The offices are housed within a fenced compound but do not have direct access onto airside. The offices were built in 1997 and are approximately 105m2 in size. The offices have air conditioning units, toilets and a kitchen. The structure is timber framed with corrugated iron roofing and aluminium cladding; it is generally in a poor condition. White Training Room The white training room is of a similar construction to the operations room. The building is approximately 168m2 and houses a training room set-­‐up together with some smaller offices used by the operations staff. The training room is in an average condition. Staff Houses The staff houses are located to the northeast of the domestic terminal. There are 25 houses located within close proximity to one another. The houses are occupied by employees of the fire service, Solomon Airlines and Civil Aviation. They are all owned by the Ministry of Aviation and Communication. Each house is approximately 15m2, with one larger 20m2 house. They are in an extremely poor condition, however they have had repair work undertaken on them in the past years, however this appears to be limited to upgrading of roofing, cladding and water supply. Information Memorandum 37 6 August 2012 Gatehouses There are six gatehouses located around the airport, generally in tandem with a boom gate. Each one is approximately 13m2 and includes a small deck but has no fit-­‐out. They are seated on raised timber piles. They are typically in a good condition. Radio Transmitting Station The Radio Transmitting Station is located off site to the north of the airport. The transmitting station consists of equipment for civil aviation radio communications. The site contains a number of aerials and antenna for this purpose. The building on the site was built ca.1975 and has recently had renovations that included repairing some of the roof, repainting, improving the water supply and a new generator. The building is also fitted out with a number of air-­‐conditioning units, kitchen and bathroom facilities. The building is in poor condition with a number of cracks in the structure sighted. Access into and out of the site is also poor, with a number of potholes in the track. Power Building The power building is located to the northeast of the international terminal. The building houses switchboards and a back-­‐up generator for the airport. The structure consists of steel portal frames with aluminium cladding; it has an approximate footprint of 132m2. The building also has fire protection insulation, although it is in poor condition with a significant amount of the insulation missing. The building is in average condition, with maintenance work needed. Store There is a small storage shed located at the domestic terminal car park. The building is used as storage shed and has an area of 60 m2. Tractor Shed The tractor shed is located in the operations compound to the west of the international terminal. The shed is a simple steel structure with a corrugated iron roof. It is approximately 30m2 and is in average condition. Containers A number of containers are used on site for storage purposes. There are three in total, two in the operations compound and a third next to the hanger. They are founded on raised concrete foundations so they are not in contact with the ground. Each container is 6m long and they appear in reasonable condition given they are exposed to the elements. Met Office The met office is an annexe to the domestic terminal, located at the northeastern end of the structure next to the control tower. The building is in poor condition generally due to a lack of any significant maintenance to the building. The structure is approximately 60m2 and contains a number of small offices that house the meteorological services equipment. The building is of approximately the same age as the domestic terminal, constructed c.1975 and is in a poor condition. Information Memorandum 38 6 August 2012 Domestic Terminal Café The café is annexed onto the landside of the domestic terminal. It was constructed c.2000 with a 48m2 footprint. The building has small area for customers to sit as well as a small kitchen at the rear of the building. It is in good condition, however it is constructed with a Sago Palm roof that requires regular maintenance. Building Systems There are three generators on the airport site. All of which are in a generally good condition. One generator is located at the Radio Transmitter Station that appears to be only a few years of age. They are all in in working order. 6.
Utility Services Wastewater The waste water system at the international terminal is a simple design where waste and sewage water is treated in a septic tank and then treated water is pumped to the pump station, storage/ holding tank through percolating pipes. The storage-­‐holding tank is in a poor condition. The waste and sewage water at the domestic terminal is treated in septic tanks that are located beside the water supply tanks. Water Supply There are three water supply sources for the international terminal (city water services, rain water storage, and well water) the water is transferred by a pressure type water supply system. The well water in unsuitable for drinking and is mixed with rainwater. There are four water reservoirs above ground and an underground tank for fire fighting supply. The water supply bore is in a poor condition and one of the pumps is missing. The domestic water supply is from capture of rainwater from the terminal roofs. There are a total of 4 stainless steel tanks and they are all in fair condition. 7.
Other Sundry Assets Navigational Aids Honiara Airport is currently installing Navigational Aids. The system is to be equipped with a VHF omnidirectional range (VOR) to help pilots find the direction to the airport. The VORs is accompanied by distance measuring equipment (DME) to determine the distance to the VOR. The following Doppler VHF omnidirectional radio range (DVOR) equipment is being installed. Information Memorandum 39 6 August 2012 Component Description Quantity Dual DVOR VRB-­‐52D (100W) Doppler VHF omnidirectional radio range a type of short-­‐range radio navigation system for aircraft including installation materials, batteries (Part No. 5A71110-­‐100) 1 DVOR Counterpoise Electrical ground that is not connected to earth 1 Dual DME LDB-­‐102 (1kW) Distance measuring equipment (DME) including installation materials, batteries (Part No. 2A72500) 1 DVOR Remote Control Equipment Spares for DVOR/DME 1 Remote Control Equipment for the DVOR Spares supplied for DVOR and Distance measuring equipment (DME) 1 The Non-­‐Directional Beacons (NDB) and Air Traffic Management (ATM) were supplied in 2011 and commissioning will be completed in 2012. The NDBs are to be installed on outer islands. Generally speaking service life for DVOR/DME/NDB is 15 years, depending on maintenance regime. For ATM, the IT components will have normal life expectancy for that type of equipment. A process of regular updates and hardware updates can be expected throughout its life Component Description Quantity Dual Deacons Including rack, handbooks, batteries, cables (Part No. VR125D BIBTR) 5 Antenna System NBD Antenna System 4 Antenna Tuning Unit NBD Antenna Tuning Unit 5 Surge protection unit Surge protection for NDB 5 ATM Core System Air Traffic Management System (ATM) 1 ATM Consoles, radios etc. Air Traffic Management System (ATM) 1 Other Assets There are various other sundry assets which were identified during the site visit such as fire trucks, airport operations vehicles and communications assets these are summarised in the table below. Information Memorandum 40 6 August 2012 Component Description Quantity Fire trucks Old fire truck not working 1 Fire trucks Fire truck working 2 Fire trucks New fire truck, new truck (Panther) purchased from Austria 1 Protective Equipment Protective equipment for 5 fire fighters 5 Operations Vehicle Lands Cruiser 1 Security Van Toyota Hi-­‐ace Van 1 Operations Vehicle Other Operations vehicles 4 Tractor Massey Ferguson Model 5340 1 Mower Flat mower for Massey Ferguson 1 Ride-­‐on Mower Kubota F3590, not working 1 Ride-­‐on Mower Kubota F3680 1 Aerials and mast Transmitting Station 20m high aerials and masts 4 Communications Phones and fax's and printer, computers, copies 1 Information Memorandum 41