Dubai aims to spend $35.7bn to develop its second airport and logistics hub in the south of the city and is likely to rely on debt for a significant part of the financing, two people with knowledge of the plan said.
The investments will be made in Dubai World Central and associated facilities, including Al Maktoum International airport, over the next 12 years, the people said, asking not to be identified because the information isn’t public. The spending plan is outlined in documents inviting banks to bid for a $3bn loan the government is seeking to raise for initial expansion, the people said.
HSBC Holdings is the financial adviser on the loan.
The loan is being raised by a special purpose company, which will be paid by Dubai’s department of finance based on a formula linked to passenger numbers at the city’s two airports, said the people. The company will also raise future funding for the project including debt, the people said.
Al Maktoum International is at the heart of Dubai World Central, a 140 square kilometre (54 square miles) multiphase development of six zones, including for logistics, offices, residences and golf, according to Dubai Airports’ website. Costs for the entire DWC development have been estimated in excess of $32bn, according to the company.
“The proposed borrowing, especially in the context of the chunky headline number, may raise some questions marks and even concerns in the minds of investors,” Chavan Bhogaita, head of market insight and strategy at National Bank of Abu Dhabi, said by phone. “In recent years we have seen a significantly more mature, sophisticated and sustainable approach to debt financing by Dubai Inc entities.”
Upon completion, Al Maktoum will become the world’s largest airport with an ultimate capacity exceeding 220mn passengers and 16mn tonnes of cargo per year. Al Maktoum is close to the World Expo 2020 site and Dubai plans to move flagship carrier Emirates there by 2025. A spokesman for Dubai’s department of finance declined to comment.
Dubai International Airport, the emirate’s main facility now, is already the world’s busiest by international passengers as the city developed into a hub for trans-continental traffic between America and Europe with Asia. Traffic rose at an average compound annual growth rate of 13% between 2000 and 2015 as Emirates expanded into the world’s biggest airline by international passengers.
Dubai International and Al Maktoum will grow to serve 146mn passengers by 2025, up from 78mn in 2015, the government said last month. The master plan for Al Maktoum’s second phase has been approved and the detailed design work is under way, while Dubai International is approaching maximum capacity and is facing space constraints, it said.
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