Beyond Madinah: How a crisis reaffirmed the power of PPPs


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Cars are parked in front of the Prince Mohammad Bin Abdulaziz International Airport in Madinah Saudi Arabia, the first LEED gold-certified airport outside of North America, which benefitted from a successful PPP restructuring to continue its operations amidst the drop in the air traffic during the pandemic.
The Madinah airport, which opened a new terminal in 2015. © Alexandre Leigh.

As an investment officer at IFC back in 2011, I worked on the mandate to structure a public-private partnership (PPP) for the Prince Mohammad Bin Abdulaziz International Airport in Madinah, Islam’s second-holiest city. The $1.2 billion project was one of the largest mandates for IFC’s PPP business at that time. A flagship for PPP expansion in Saudi Arabia and the region, the airport serves as a hub for millions of Umrah pilgrims every year, as well as other domestic and international passengers. 

Nearly a decade later, I was fortunate to be called upon by the government to help restructure the project, this time as the Regional Manager for IFC’s PPP transaction advisory team for the Middle East, Central Asia, Türkiye, Afghanistan, and Pakistan, what we at IFC call the MCT region. The global pandemic had triggered an 80% drop in passenger traffic and its private operators could no longer make the required debt service payments. Against a tight 10-week deadline with a threat of termination, I am proud to say that the MCT PPP transaction advisory project team managed to get all stakeholders to sign off on a restructured PPP, mobilizing $1.1 billion from the private sector in the process. 

The continued success of the Madinah airport PPP is testament to the strength of PPP development in Saudi Arabia and across the Middle East.  In the last 10 years, PPPs have become an effective way for governments to tap into private capital and operational expertise to build and operate infrastructure, such as roads and airports, and provide access to such services as health care. 

When the Madinah airport first opened to the public in 2015, it was the first LEED gold-certified airport outside of North America, an important designation for addressing climate change. LEED, or Leadership in Energy and Environmental Design, rates buildings based on energy efficiency and other green performance measures.

Muneer Ferozie and Alexandre Leigh of IFC’s PPP team who successfully led the Madinah airport PPP restructuring, stand at the entrance of the airport during the opening of its new terminal.

The 25-year Build-Transfer-Operate agreement called for the concessionaires to build the facility at their expense in return for the right to operate it for 25 years. For every dollar the concessionaire made, almost 55 cents are paid to the government as a revenue-sharing arrangement. 

Successful partnerships require confidence, transparency, and a balanced risk-rewards allocation. In October 2021, when attempts to revise the agreement stalled, IFC was called in as a credible advisor, thanks to our long-standing relationships and institutional knowledge of the project. 

The travel industry was still in trouble, with no clear indication when the COVID-19 pandemic would end. Our biggest hurdle was a 10-week deadline demanded by lenders in response to two missed debt service payments by the airport operator. We had until midnight, December 30, 2021, to structure the deal and deliver a revised contract acceptable to all parties. We all know it takes two to tango, but in this case, it took five, including the investors, lenders, and three public-sector entities: the General Authority of Civil Aviation, Ministry of Finance, and the National Centre of Privatization and PPPs.

It went down to the wire, but the deal was signed on time. The IFC MCT PPP team advised on an agreement allowing for a temporary traffic recovery period, accelerated repayment of deferred concession fees, and further expansion of the airport post-COVID-19. The rebalancing provided for a successful restructuring of the debt amounting to $680 million and a fresh equity injection of around $430 million. The new money represented $1.1 billion in core mobilization, about 10% of IFC’s total mobilization from the private sector in FY22.

The experience reinforced the importance of nurturing strategic relationships and building trust with our clients. It also shows the importance of including flexible mechanisms to manage “force majeure” episodes in PPP contracts. 

We are seeing increasing demand for PPPs in the region, driven not only by fiscal constraints but also the desire to bring in the private sector to improve efficiency and introduce best management practices.

I am grateful to my team for all the hard work to deliver on this and to the client for giving us the opportunity to help preserve the Madinah airport PPP, which facilitates travel for Muslim pilgrims from across the globe. The successful restructuring has boosted investor confidence in the public sector, which has demonstrated a resolve to help PPPs through tough times—and thrive. 


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Muneer Ferozie

Regional Manager and Head for PPPs in the Middle East, Central Asia, Türkiye, Afghanistan, and Pakistan Region, IFC

Join the Conversation

Larry Happiday
March 07, 2023

That's an interesting one. It's not only remarkable that all stakeholders agreed to a rescheduled payment arrangement but injected more funds in a time of gloom. I commend your highwire negotiation skills that made that possible and in a timely manner.

M Yousuf Ali
March 07, 2023

It is noted that IFC has done this prestigious Project under PPP Mode. It is a news for us that such good projects and that too under Build transfer and Operate mode is executed.

Hossein Nourzad
July 26, 2023

Thanks for sharing this best practice with us. Debt restructuring is a complex task in PPPs and it is very interesting that you successfully conducted this process for such a great projects with multiple stakeholder. I am sure that you had a strong stakeholder engagement plan in place.