Authorities in Saudi Arabia are close to launching two airport PPP tenders worth together over USD 1bn, sources said.

The National Center for Privatization (NCP) will next quarter issue the RFQs for PPP tenders to develop the Abha and Taif regional airports, two sources familiar with the situation said.

The NCP, in collaboration with Saudi aviation authority Matarat, will publish first the 30-year DBFOM tender for Abha, followed by a similar announcement for Taif, one of the sources said.

Prospective bidders are already in the process of appointing advisors, with major airport operators showing interest, the other source said.

Existing operators of Saudi airport concessions include Aeroports de Paris and Turkey’s listed airport operator TAV.

Abha will involve the expansion of an existing airport, and Taif will involve a new greenfield airport to replace a smaller existing facility.

The capex of each PPP is yet to be confirmed, but together they will require over USD 1bn of investment, the same source said.

Both airports are smaller than the flagship airports in Saudi Arabia, which include Jeddah, Medina and capital Riyadh. Abha is the fifth largest airport in the country and Taif the sixth, the first source said.

The new Abha airport will be able to handle 13 million passengers annually, up from two million currently. Taif will handle an estimated four million passengers annually by 2030, the expected start of operations. This will increase to seven million by the end of the concession period.

Expansion of the airports is planned as huge amounts of capital are being injected into these two regions, the first source said.

Abha, the capital of Aseer region, is anticipated to become a major economic zone in Saudi Arabia, attracting three times the amount of visitors in 2030 than it does currently.

Taif, a city just east of Mecca, is a key nexus for international pilgrims and the expansion of the airport will increase the number of pilgrims coming in, the first source says.

A previous version of the Taif airport PPP, valued at around USD 950m, was tendered in June 2015 and awarded to a consortium comprising Oman state-owned logistics firm Asyad Group, Athens-headquartered Consolidated Contractors Company and Munich Airport Group.

The tender was signed in April 2017, but did not reach financial close after the relationship between the consortium and Matarat broke down, the second source said. The National Commercial Bank was among the project’s lenders.

The consortium had expected to be offered a payment guaranty that covered the traffic risk for the airport, but this was not provided by the Saudi government, they added.

The first source said that many changes have been made to the country’s investment landscape since then, including the government’s implementation of the private sector participation law in July 2021.

The law, which among other things provides a formal framework for the procurement of PPPs, has widespread backing from the Saudi political elite, ensuring that the necessary steps required to secure investment are taken, including possibly provision of credit support and other guarantees to sponsors, they said.

In April 2023, the NCP listed Abha and Taif among the four new airport PPPs intended as part of a bigger pipeline of 200 privatisation and PPP projects.