Comments on: Airport privatization is approved in Puerto Rico, but won’t solve long-term problems Bridges, budgets, bonds Mon, 24 Nov 2014 00:29:08 +0000 hourly 1 By: PuertoRicoPuede Thu, 28 Feb 2013 00:07:33 +0000 Ms. Long: I have always wondered where do you and many local (in Puerto Rico) economists come up with your valuations and arguments about the deal being undervalued for PR…well, the FAA has the best, simple explanations for us mortals. I have copied below the response of the FAA to this concern:

Concern: Aerostar’s Proposal undervalues SJU

A number of comments indicated that the Aerostar proposal undervalued the Airport

FAA Response:
The FAA reviewed and confirmed that the studies used an analyses based on simple extrapolations of historical airport operating data that compared the present value of future airport income, as estimated by the commenters, to the present value offered by Aerostar. Although each commenter made different assumptions, all commenters concluded that the terms of the proposed lease undervalue SJU. Generally speaking, the commenters’ annual revenue growth assumptions are not consistent with the historical operating results for SJU. Also, the revenue streams resulting from their respective forecasted growth rates do not accurately reflect the risks associated with investing in the stand-alone operation of the airport. A more moderate revenue growth rate and a higher discount rate reflecting the risks associated with investing in SJU would have resulted in a lower estimated valuation closer to the amount bid by Aerostar through the PRPA competitive solicitation process.