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Male International Airport

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Nov 30, 2012

BS reported a little storm in the Indian Ocean:

GMR Infrastructure Ltd, operator of the Maldives’ biggest airport, fell the most in a week after the island-nation cancelled the Indian company’s contract to run the facility. GMR shares dropped 1.4 per cent, the most since November 22, to close at Rs 17.7, after slumping to the lowest level since their August 2006 debut. The stock has fallen 16 per cent this year, compared with a 29 per cent gain for the S&P CNX 500 Index. The market was closed for a holiday yesterday.

Maldives Airports Co. will take over the operations of the Male International Airport within seven days, Shaheema Hussain, its company secretary, said. GMR, which runs India’s biggest airport in New Delhi, and its partner had planned to spend about $510 million to upgrade the Male facility as the Bangalore-based company seeks to boost overseas business.

“If there is no compensation, it’ll be a big loss for GMR,” said Amit Srivastava, a Mumbai-based analyst at Nirmal Bang Institutional Equities.

There were other little rumbles, as ET reported:

Axis Bank has sent a legal notice to the Maldives government to recover its $350 million loan given to GMR Infrastructure after the Maldives government decided to terminate a contract with the GMR Group under which the Indian company was to operate the Male International airport.

“The bank has hired a law firm in Singapore,” said a person familiar with the matter. “The bank had disbursed the funds based on government guarantees. Now, if the Maldives government cancels the contract, the government should stand by it,” he added.

BS dug into further possible problems:

While GMR Infrastructure is facing problems in the Maldives, Tata Housing, among the few companies operating there, says its Rs 900-crore real estate project in that country is unaffected.

However, according to media reports, the Maldives government has sought to take over the site given to Apex Realty, the special purpose vehicle (SPV) which is a joint venture between SG18 Developers, a local company, and Tata Housing.

Livemint looked at the big picture for Indian businesses operating outside the country:

The growing focus of Indian companies, including government ones, on emerging markets across Asia and Africa, and the attendant political risks of doing business in a dynamic policy regime—a problem that several Western multinationals have encountered in India—has highlighted a new challenge for New Delhi: protecting the overseas investments of Indian firms.

Earlier this week, Bangalore-based GMR Group’s contract to develop an airport in Male was scrapped by the Maldives government.

“These are certainly 21st century challenges for India,” said a senior government official who did not want to be identified. “We want to play by the rules of the game, that is our aim. So we are also participating in setting the rules of the game—at WTO (or elsewhere) to ensure the system will provide an open forum, whether it is discussing bilateral investment protection treaties, the movement of people or data transfer.”

Since 2007, Indian companies have rapidly scaled up their global presence, investing at least $45 billion in companies in other countries. Some of the major deals concluded in this period include Tata Steel Ltd’s acquisition of Anglo-Dutch steel maker Corus Group Plc for $12.2 billion in 2007, Tata Motors Ltd’s acquisition of Jaguar Land Rover for $2.3 billion in 2009, the Aditya Birla Group’s acquisition of Novelis Inc. in 2007 for $5.9 billion, telecom firm Bharti Airtel Ltd’s acquisition of the African operations of Kuwaiti telcom operator Zain Telecom for $10.7 billion in 2010, and, more recently, ONGC Videsh Ltd’s (OVL’s) acquisition of an 8.4% stake Kazakhstan’s Kashagan oil field for $5 billion from ConocoPhillips Co.

The setback in the Maldives has come as a shock to the government, especially since it is a country in the Indian Ocean with which India has enjoyed historical links and where India thought it wielded considerable influence. GMR’s $511 million joint venture with Malaysia Airports Holding Bhd to build the Male airport—a deal won in 2010—was among the largest global infrastructure contracts won by an Indian company in recent years. And the move by the Maldivian government to scrap the contract citing “legal, technical and economic issues” seems to have come despite the government’s best efforts.

The contract turned controversial following a regime change in the Maldives resulting in the exit of the government headed by Mohamed Nasheed, and Mohammed Waheed taking charge this February. India was one of the first countries to recognize Waheed’s administration despite Nasheed claiming he had been ousted in a coup.

In the case of the Maldives, GMR may face difficulty in initiating arbitration proceedings because India does not have a bilateral investment treaty with the country. The Maldives also is not a signatory of the International Centre for Settlement of Investment Disputes of the World Bank group that facilitates arbitration of legal disputes between international investors. India has so far signed bilateral investment protection agreements with 82 countries, out of which 72 BIPAs have already come into force.

Dec 3, 2012

NDTV reported developments from Singapore:

The Singapore High Court has stayed the termination of a $511 million airport contract that the GMR group was executing in Maldives, enabling the company to continue operations at the Male airport.

Shares in GMR Infra shot up nearly 6 per cent after the news. At 11.29 a.m. the stock traded 5.65 per cent higher at Rs. 19.65 on the National Stock Exchange outperforming the broader Nifty that traded 0.22 per cent lower at 5,867.

Reuters reported that the Maldives government refused to heed the order:

Maldives will wrest control of its international airport from GMR Infrastructure(GMRI.NS), cancelling its biggest foreign investment project, despite an order from a Singapore court suspending the project’s termination.

The standoff over the $511 million project threatens to cloud foreign investor sentiment on Maldives, which is seeking overseas cash for many of its tourism projects. The country terminated an agreement with GMR last week, rattling its relations with India.

“We will continue the airport takeover and Inshallah next Saturday onwards MACL (state-controlled Maldives Airport Company Ltd) will be running the airport,” Mohamed Nazim, defence minister and acting transport minister, told a press conference in the capital Male on Monday.

The cancellation follows President Mohamed Waheed’s failure to renegotiate terms, sources close to president’s office told Reuters, and comes after a year of political turmoil that saw the ousting of its former president and months of unrest.

Shares in GMR closed up 5.4 percent at 19.60 rupees in a Mumbai market that ended down 0.2 percent.

“We would fight for our rights all the way, through the court. That is very clear,” Andrew Harrison, chief executive officer of the GMR airport project, told CNBC-TV18 news channel.

“We expect that under the terms of the concession agreement … any orders issued by the (Singapore) court would be respected, because that is enshrined within the agreement.”

Dec 6, 2012

Financial Chronicle reports a reversal of fortune for Maldives:

A Singapore court ruled in Maldives’ favour on Thursday in the South Asian island nation’s move to cancel a $511 million airport development contract with GMR Infrastructure, clearing the way for it to take over the airport.

The ruling comes after an order won on Monday by GMR that had suspended the government’s decision to cancel the contract, although the Maldives had still been pressing ahead with plans to take over the airport.

“The Maldives government has the power to do what it wants, including expropriating the airport,” Sundaresh Menon, the Chief Justice of Singapore, said in court.

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Written by Arhopala Bazaloides

December 3, 2012 at 1:20 pm

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