CAAP Announces Its Subsidiary ICASGA in Natal, Brazil, Receives Indemnification Payment Related to the Friendly Termination of Its Concession Agreement

Rhea-AI Summary

Corporación América Airports S.A. (NYSE: CAAP) announced that its subsidiary received a gross indemnification payment of R$610.4 million for the termination of the concession agreement of the Natal airport in Brazil. The payment is expected to have a positive impact of R$610.6 million on the company's Adjusted EBITDA in 4Q2023. The termination process is set to be concluded by early March, with the airport to be transferred to a new operator.

Insights

Financial Analyst

The indemnification payment of R$610.4 million received by Corporación América Airports S.A.'s subsidiary is a significant financial event that merits attention from investors and stakeholders. The immediate positive impact on Adjusted EBITDA of R$610.6 million is noteworthy, as EBITDA is often used as an indicator of a company's operating performance and potential to generate cash flow. This one-time gain will likely improve the company's financial ratios in the short-term, potentially making the company's stock more attractive to investors.

However, it is important to consider the long-term implications of this transaction. The divestiture of the Natal airport concession will lead to a loss of future revenue streams for CAAP. Investors should assess the company's strategy for reallocating capital and resources to ensure sustained growth. The market will also be looking at how effectively CAAP can manage the transition and redeploy the indemnification funds into profitable ventures.

Market Research Analyst

From a market perspective, the transfer of the Natal airport concession is indicative of the dynamic nature of infrastructure management and the potential for regulatory changes to affect operations. The fact that the Natal airport was the first of its kind in Brazil to be transferred to the private sector makes this a landmark case in the country's airport infrastructure sector.

Investors and competitors alike will be closely monitoring the transition to gauge the efficiency of the concession model in Brazil and the potential for future public-private partnerships (PPPs). The successful execution of this transfer could encourage similar transactions, thereby influencing the market for airport concessions both domestically and internationally.

Legal Expert

Legally, the process Corporación América Airports S.A. has undertaken adheres to the Brazilian regulatory framework, which is crucial in maintaining investor confidence. The indemnification was calculated based on non-amortized capital expenditures, which is a standard approach in concession agreements when calculating reimbursements for investments not yet recovered through the operation of the asset.

The involvement of the Tribunal de Contas da União (TCU) in clearing the tender process adds a layer of government oversight that is reassuring for stakeholders. It's also significant that the company is preemptively announcing its plans to pre-pay outstanding indebtedness, which could have a favorable effect on its credit standing and future borrowing costs.

Gross indemnification payment of R$610.4 million

Effective transfer of the airport to be concluded by early-March

LUXEMBOURG--(BUSINESS WIRE)-- Corporación América Airports S.A. (NYSE: CAAP), (“CAAP” or the “Company”) one of the leading private airport operators in the world, announced today that its fully owned subsidiary Inframérica Concessionária do Aeroporto de São Gonçalo do Amarante S.A. (“ICASGA”) received in full a gross indemnification payment totaling R$610.4 million in connection with the friendly termination process of its concession agreement of the Natal airport, in Brazil. This process has been carried out strictly in compliance with the existing Brazilian legal and regulatory framework and fully coordinated with all Brazilian authorities. The aforementioned amount was determined by the corresponding authorities, primarily based on non-amortized capital expenditure investments.

On March 5, 2020, ICASGA filed a request to the Brazilian Federal Government to commence the termination process of the concession agreement. Later, in November 2020, ICASGA executed an irrevocable amendment for the termination of the existing concession. Pursuant to the terms of the amendment agreement, upon the execution of a new concession with a new operator, an indemnification payment had to be made to ICASGA. On January 18, 2023, the “Tribunal de Contas da União” (TCU), a government-related entity, gave clearance for the government to carry out the tender process for the Natal airport, which finally took place on May 19, 2023.

The Company informs the following key amounts:

1. Gross indemnification payment: R$610.4 million
2. Positive impact on Adjusted EBITDA (to be recorded in 4Q2023): R$610.6 million

The impact on Adjusted EBITDA is primarily calculated as follows: gross indemnification payment, minus applicable direct taxes and the “disposal of the concession assets”, plus the “reversal of the impairment loss” previously recorded.

The gross indemnification payment is subject to certain regulatory deductions (estimated at R$89 million), taxes, as well as costs and expenses to terminate the operation of the airport. In addition, ICASGA will pre-pay all of its outstanding indebtedness. The net amount in connection with ICASGA’s indebtedness is estimated at R$72 million. The Company will inform the market in due course the net amount of the indemnification payment.

The Natal airport was the first airport in Brazil transferred to the private sector, in 2011, and the first greenfield federal airport built by the private sector. It began operations in May 2014, providing the local population and visitors a new, modern, and comfortable facility. The Company expects to initiate the transition period with the new operator by mid-January and that the concession termination process will be finalized by early March, when all rights and obligations (including revenues and expenses) will be transferred to the new operator.

Given the Natal Airport will no longer be part of the Company’s portfolio, historical passenger and cargo information will be reported on a pro-forma basis without such airport.

About Corporación América Airports

Corporación América Airports acquires, develops and operates airport concessions. The Company is one of the leading private airport operators in the world, currently operating 53 airports in 6 countries across Latin America and Europe (Argentina, Brazil, Uruguay, Ecuador, Armenia and Italy). In 2022, Corporación América Airports served 65.6 million passengers, 83.7% above the 35.7 million passengers served in 2021 and 22.1% below the 84.2 million served in 2019. The Company is listed on the New York Stock Exchange where it trades under the ticker “CAAP”. For more information, visit http://investors.corporacionamericaairports.com

View source version on businesswire.com: https://www.businesswire.com/news/home/20240108427334/en/

Investor Relations Contact

Patricio Iñaki Esnaola

Email: patricio.esnaola@caairports.com

Phone: +5411 4899-6716

Source: Corporación América Airports

FAQ

What is the ticker symbol for Corporación América Airports S.A.?

The ticker symbol for Corporación América Airports S.A. is CAAP.

What was the gross indemnification payment received by the subsidiary for the termination of the concession agreement of the Natal airport?

The subsidiary received a gross indemnification payment totaling R$610.4 million.

What is the expected positive impact of the termination on the company's Adjusted EBITDA?

The termination is expected to have a positive impact of R$610.6 million on the company's Adjusted EBITDA in 4Q2023.

When is the termination process of the concession agreement expected to be concluded?

The termination process is expected to be concluded by early March.

When will the airport be transferred to a new operator?

The airport is expected to be transferred to a new operator by early March.