The UK Government has reinforced earlier comments by the Civil Aviation Authority (CAA) that it expects any bidders for BAA to be prepared to invest heavily to meet the forecast rise in travellers to and
from south-east England.
UK Transport Secretary Alistair Darling said that two additional runways will need to be built by 2030 and he stressed that any bidders should look at investment sooner rather than later.
In a statement, Darling said: ‘The government therefore supports the view, recently expressed by the CAA, that it is important that any owner of a London airport should recognise the significant near and medium-term investment requirements. This is likely to require the maintenance of credit quality sufficient to ensure the cost-effective financing of future investment.’
Such a statement by a senior government official is unusual and would suggest that the government is concerned that a company could effectively gain control of BAA and sweat the asset, rather than invest in it.
This would also suggest that while it cannot say the same, the government is not too impressed with the terms and conditions of Grupo Ferrovial?s bid for BAA last week where it offered ?8.8bn ($15.3bn) for BAA.
In its charm offensive talks with BAA shareholders and analysts this week, Ferrovial has maintained that it would continue to invest in BAA?s infrastructure. But this is a little academic while its offer remains at ?8.8bn, since BAA shareholders have already indicated that they will not consider selling at this price.
Shareholders such as Scottish Widows Investment Partnership and Standard Life Investments have already stated that they will not sell at this price, although some analysts who are talking about a ?10 ($17) share price down the line might be a little ambitious.
Ferrovial is said to be trying to woo shareholders over to its offer this week, but money is likely to talk loudest and the group may have to raise its offer ? as it has indicated it might do – or walk away altogether. Meanwhile, speculation is rife that other bids might come into play.
Darling?s aforementioned comments were made in relation to a consultation by the CAA on price caps to airport charges which the CAA is currently reviewing at BAA?s London airports of Heathrow, Gatwick and Stansted.