Airport constructor-turned operator
Vahaj Ahmend, Head of Industrials Equity Research | Kiti Pantskhava, Senior Credit Analyst
Summa Group is an international construction contractor that is diversifying into the long-term sustainable business of operating airports and running hospitality facilities. The company is targeting cash-generating internationally high-profile projects that provide hard currency revenue streams. Summa’s base in Turkey enables it to leverage experience and skills accumulated in the local construction industry, and it is a geographically convenient location for shipping materials and equipment to the company’s many projects in Sub-Saharan Africa (SSA), where Turkey has a great deal of political capital and a broad diplomatic presence.
A history of delivering a wide range of construction projects. Summa’s portfolio of completed projects includes commercial and residential property, business centres, offices and shopping malls, hospitals, hotels and industrial complexes, and various infrastructure projects (such as roads and airports). The company has been ranked in the top 250 (#226 in 2018) international construction companies by Engineering News-Record (ENR – a specialist construction industry magazine published in the US) for the past 11 years. Since 1989, Summa has completed 84 construction projects in 12 countries, with a combined value of EUR2.4bn.
Current project portfolio is focused on SSA. The company is recognised as a reliable partner for local authorities in SSA in delivering essential infrastructure projects. In 2019-22, Summa plans to complete EUR1.7bn-worth of projects, including two build-operate-transfer (BOT) airport contracts in Niger and Sudan, accounting for more than half of the projects’ value. The size of the airport projects suggests that Summa might seek external funding for part of the investment, structured as project finance. The long-term concession agreements allow the recovery of invested capital and the generation of income through various sources, including an infrastructure development charge per departing international passenger, collected directly through the International Air Transport Association (IATA). In total, Summa could be looking to raise EUR399mn for the two airports. We estimate the new airport concessions could generate operating profits of at least EUR100mn per annum from 2022.
Key risks include political instability and weak macro, but not FX. SSA has historically been prone to political instability, and many countries in the region have experienced crises due to droughts and floods. These factors are unpredictable and could affect passenger movements to and from Niger and Sudan, and, in turn, Summa’s airport operations. However, the company’s contracts are signed in hard currency (US dollars or euros) and, therefore, it is not exposed to the volatility of the Turkish lira and other local currencies.
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