Works on Kumasi Airport restricted by encroachment
Plans by the Ghana Airports Company Limited (GACL) to extend the runway of the Kumasi Airport to carry bigger flights have been restricted due to encroachment on the land originally acquired for the expansion of the airport.
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This was due to the inability of the GACL to secure a land title registration for the land from the Lands Commission.
As a result of this, the GACL has embarked on a programme to acquire titles for lands acquired for aviation development to forestall future encroachment.
This was contained in the report of the Finance Committee on a buyer credit facility agreement between the government and Banco Santander S.A and its affiliates for an amount of up to EUR€ 65,037,500 and a tied commercial loan agreement for an amount of EUR€ 7,762,500 for the development of the Kumasi International Airport.
The committee, in its report, therefore, urged the Ministry of Transport to facilitate the process of acquiring the land title to help the GACL acquire the needed titles for all properties acquired for aviation development in the country.
Background
For some years now, the development of Ghana’s airport infrastructure lagged behind economic growth, as the country has, since independence, relied on the Kotoka International Airport as the sole airport for international travels.
Kotoka has, however, come under pressure from rising passenger numbers, while major regional centres such as the Kumasi and Tamale airports lacked the requisite infrastructure and connectivity that could have helped them better tap into the growth in the aviation industry.
To address these challenges, government has undertaken investment projects aimed at expanding the capacity of existing airports with the view to supporting expansion in the aviation industry while enhancing Ghana’s position as a regional aviation hub.
It is against this background that the government came to seek the approval of Parliament for loan facilities which will be on-lent to the GACL for the execution and completion of the Kumasi International Airport.
Loan agreement
The Kumasi Airport expansion project is in line with government’s vision to develop and expand the infrastructure base of the airport as a strategic commercial and airport linking the sub-region to facilitate the movement of people and goods.
The project is to be financed through a buyer credit agreement by Banco Santander S.A with export credit guarantee from UK Export Finance and a tied commercial loan provided by Banco Santander S.A amounting to EUR€ 72,799,500 of which the buyer credit agreement is EUR€ 65,037,500 and that of the tied commercial loan is EUR€ 7,762,500.
The buyer credit agreement comes with a 10-year tenor, a grace period of two years, an interest rate of 6M EURIBOR plus 1.3 per cent per annum, commitment fees of 0.70 per cent per annum, structuring fees of 1.50 per cent flat, and ECA fees of 0.3 per cent flat.
The tied commercial loan also comes with a tenor of five years, grace period of two years, an interest rate of 6M EURIBOR plus 5.05 per cent per annum, commitment fees of 2 per cent per annum, structuring fee of 1.50 per cent flat, and a risk mitigation fee of 2 per cent per annum.
On-lending
The committee, in its report, noted that the project for which the loan was being requested was a commercial project that was capable of generating sufficient cash flow to pay back the loan.
It also pointed out that the GACL was a viable institution with the capacity to borrow on its own balance sheet.
It was, therefore, of the view that government should only provide guarantees to such viable institutions to free up space for financing other critical state infrastructure.
The Deputy Minister of Finance, Mr Cassiel Ato Forson, also explained to the committee that in line with government’s debt management policy, the loan facility would be on-lent to the GACL.
He indicated that mechanisms would be put in place to escrow the revenues from GACL to service the credit facility.
Scope of the project
The committee noted that the phase two of the Kumasi International Airport expansion project involved the expansion and upgrading of existing infrastructure at the airport to meet the status of an international airport.
Works to be done include the development of a new terminal building with space area of about 7,000 metre square, construction of a new car park and extension of existing runway from a length of 1,981 metres to 2,500 metres.
The project also includes the development of road network around the airport.
Officials of the GACL also pointed out that upon completion of the project, the capacity of the airport would be enhanced to carry a maximum of Boeing 737 with restricted loading of 747 crafts. — GB