20-F: Grupo Aeroportuario del Centro Norte (OMA) Details Tariff Regulation Rules in 20-F Filing

Grupo Aeroportuario del Centro Norte's 20-F filing outlines the rules governing tariff regulation applicable to its airport concessions, emphasizing compliance with Mexican law and oversight by the Federal Civil Aviation Agency (AFAC).

Summary

• The document outlines tariff regulations applicable to Grupo Aeroportuario del Centro Norte (OMA)'s airport concessions, emphasizing compliance with Mexican law.
• The Federal Civil Aviation Agency (AFAC) oversees the application and interpretation of these rules.
• A joint maximum tariff (TMC) is established, calculated as maximum revenue per traffic unit, which the concession holder may charge for regulated services.
• The TMC is determined every five years, with potential adjustments during each period.
• Specific tariffs for regulated services must be established and registered with the AFAC and can be modified ordinarily once every six months.
• The concession holder can set different tariff levels based on various conditions, provided they do not exceed registered tariffs.
• The Joint Maximum Tariff will be determined using the discounted cash flow method.
• The AFAC adjusts the Joint Maximum Tariff annually for efficiency and updates it for inflation based on the National Producer Price Index (INPP).
• Extraordinary adjustments to the TMC can occur due to modifications in legislation, new security or environmental measures, or natural disasters.
• Reference values, representing the net present value of cash flows from regulated services, are used as an indicative parameter for the TMC.
• The discount rate, determined by the AFAC, reflects the average rates in the airport sector in Mexico.
• Compliance with the TMC and investment commitments is supervised by the AFAC, with annual reports required from the concession holder.
• The rules came into effect upon notification to the concession holder.
• The document also details criteria for assigning costs and expenses to regulated services and procedures for preparing the Master Development Program.

Sentiment

Score: 7

Explanation: The document is largely neutral, outlining regulatory procedures. The sentiment is slightly positive as it provides clarity on the framework, but also highlights potential risks.

Positives

• The document provides a clear framework for tariff regulation, ensuring transparency and predictability for OMA's operations.
• The AFAC's oversight and regular reviews of the TMC help maintain a balance between OMA's profitability and user costs.
• The flexibility to adjust tariffs based on various conditions allows OMA to respond to market dynamics and incentivize traffic growth.
• The inclusion of extraordinary adjustment mechanisms enables OMA to address unforeseen circumstances and maintain service quality.

Negatives

• The tariff regulations may limit OMA's flexibility in operating its aeronautical activities, potentially affecting its profitability.
• The annual efficiency adjustments to the TMC may require OMA to achieve continuous improvements to maintain or increase operating income.
• The dependence on AFAC's approval for tariff adjustments and Master Development Programs creates regulatory risk for OMA.
• The potential for the Mexican government to grant competing concessions could negatively impact OMA's market share and financial performance.

Risks

• Changes in Mexican laws, regulations, and decrees could materially impact OMA's results of operations.
• Large-scale international events, such as acts of terrorism or military conflicts, could negatively affect international air travel and OMA's revenues.
• The outbreak of pandemics or health epidemics, such as COVID-19, could have a negative impact on the global economy and OMA's business.
• OMA's revenues are highly dependent on levels of air traffic, which are subject to factors beyond its control.
• Geopolitical conflicts and economic sanctions could cause significant disruptions in supply chains, affecting the travel industry and OMA's business.
• Competition from other tourist destinations could adversely affect OMA's business.
• OMA is significantly dependent on revenues from seven of its thirteen airports and OMA Logstica, and any condition affecting those businesses could have an adverse impact.
• OMA is dependent on information technology, and its systems and infrastructure face certain risks, including cybersecurity risks.
• OMA faces risks associated with its diversification activities, which could lead to its inability to recover its investment as planned.
• OMA's operations depend on certain key airline customers, and the loss or suspension of operations of one or more of them could result in a loss of a significant amount of its revenues.
• Collective labor conflicts in Mexico could have an adverse impact on OMA's results of operations.
• OMA's operations could be adversely affected due to changes in the collection of passenger charges.
• OMA's operation depends on its management team for its knowledge and experience, and the loss of capable executives could affect its operations.
• The operations of OMA's airports may be affected by the actions of third parties, which are beyond its control.
• OMA may be liable for property taxes as a result of claims asserted against it by certain municipalities.
• Inability to generate sufficient future taxable profits or adverse changes to tax laws, regulatory requirements, or accounting standards could have a negative impact on the recoverability of certain deferred tax assets.
• Natural disasters could adversely affect OMA's business.
• OMA's reputation and business could be adversely affected in the event of an emergency, accident, or similar incident involving its airports.
• OMA's operations are at greater risk of disruption due to the dependence of several of its airports on a single commercial runway.
• OMA is exposed to risk related to construction projects.
• OMA is exposed to the risk of non-performance by its contractors.
• OMA's ability to expand certain of its airports and to comply with applicable safety guidelines could be limited by difficulties it encounters in acquiring additional land on which to operate its airports.
• OMA is exposed to risks inherent to the operation of airports.
• OMA could be exposed to risks related to aircraft parts manufacturing.
• OMA may not be able to detect money laundering operations and other illegal or improper activities, which could expose it to additional liabilities and adversely affect its operations and financial results.
• OMA could be exposed to additional risks if it pursues business opportunities in other countries.
• High incidences of crime in Mexico, including extortion and drug trafficking, could adversely affect the Mexican economy and may have a negative effect on OMA's business.
• The value and prices of securities issued by Mexican companies, including OMA, may be adversely affected by developments in other countries.
• Delays in the process of obtaining necessary governmental approvals could affect the ability to expand the airports of OMA.
• Mexico's environmental legislation could limit the growth of some of OMA's airports.
• Minority shareholders may be less able to enforce their rights against OMA, its directors, or controlling shareholders in Mexico.
• Enforcing civil liabilities against OMA or its directors, officers, and controlling persons may be difficult.
• Mexican law and the bylaws of OMA restrict the ability of non-Mexican shareholders to invoke the protection of their governments with respect to their rights as shareholders.
• OMA is subject to different corporate disclosure standards than U.S. companies.
• Servicios de Tecnologa Aeroportuaria, S.A. de C.V. (SETA) has the right to appoint certain key members of OMA's management, and SETA's interests may differ from those of other shareholders.
• You may not be entitled to participate in future preemptive rights offerings.
• Holders of ADSs are not entitled to attend shareholders meetings, and they may only vote through the depositary.

Future Outlook

The document outlines the process for determining and adjusting the Joint Maximum Tariff (TMC) for airport services, which will be revised regularly every five calendar years, within the final six months of the current five-year period, when the Master Development Program for the subsequent period is submitted for review.

Industry Context

This announcement provides insight into the regulatory environment governing airport operations in Mexico, which is crucial for understanding the investment landscape and potential risks and opportunities for companies like OMA.

Comparison to Industry Standards

• The document does not contain enough information to make a detailed comparison to industry standards.
• However, the document does mention that the Discount Rate or objective for return on investments is a measure of the capital cost (real, before taxes) of companies in the airport industry, and constitutes just one parameter for thedetermination of the Joint Maximum Tariff.
• The Discount Rate will be determined on the basis of average rates in the airport sector in the United Mexican States.

Stakeholder Impact

• Shareholders: The tariff regulations directly impact OMA's profitability and ability to generate returns for shareholders.
• Employees: The financial health of OMA, influenced by these regulations, affects job security and potential compensation.
• Customers (Airlines and Passengers): The tariff structure affects the cost of using OMA's airports, potentially influencing airline ticket prices and passenger volumes.
• Suppliers: OMA's investment commitments, guided by the Master Development Program, impact the demand for construction and maintenance services.
• Creditors: The stability and predictability of OMA's revenue streams, shaped by these regulations, affect its creditworthiness and ability to service debt.

Next Steps

• The concession holder must submit annual reports to the AFAC, covering all points mentioned in Appendix C of these Rules.
• The AFAC will schedule compliance-verification site visits at the airports under concession, with the aim of corroborating that the investments have been carried out in accordance with the authorized program, and according to the standards and specifications required by the applicable regulations.
• The concession holder must present an application for authorization to the AFAC by the 31st of December of the year in question at the latest if they require an amendment to its Master Development Program to adjust investment commitments in the current year or subsequent years, as a result of an extraordinary situation that has been confirmed by the AFAC.

Key Dates

Keywords

tariff regulation, airport concessions, AFAC, Joint Maximum Tariff, regulated services, Master Development Program, Mexican Airport Law, aeronautical revenues, efficiency factor, discount rate, reference values, traffic units, concession holder, airport services, Mexico