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Airport may be critical turning point

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Bermuda is at a critical turning point in its history. The potential for hundreds of millions of dollars of investment in tourism, hotels, casinos infrastructure and more means Bermudians are finally, and deservedly, poised to enjoy a revitalised economy.

Bermuda's existing airport is outdated: the buildings are well beyond their useful life and extremely vulnerable to severe weather. As Bermuda's lifeline to the world, this is untenable. Nor does it project the right image of Bermuda to the world. Everyone knows it is time for renewal. There has been a lot of healthy debate about the best way to go about doing this. The chosen solution is designed around the following key principles: no new government debt, certainty on cost and quality, and an approach that embraces the local community in terms of jobs and training opportunities.

The Government of Canada and Aecon have proposed a tailor-made approach based on an overarching government-to-government framework and the rigorous financing structures of the public-private partnership model. Endorsed by the United Nations, the World Bank and the Organisation for Economic Co-operation and Development, the P3 model has become a proven choice of governments around the world to renew and replace ageing infrastructure.

Under the proposed agreement, Bermuda will get a distinctly Bermudian, first-tier, first-class airport with state-of-the-art design that is inspired by Bermuda's culture to support the growth of the tourism industry and economy.

Canada's signatory, the Canadian Commercial Corporation, is a Crown corporation that works with foreign governments to develop or acquire information technology, clean technology, health and infrastructure — enhancing bilateral relationships and significantly reducing acquisition risks.

All contracts signed by the CCC have an “AAA”-rated Government of Canada guarantee of contract performance. This is the assurance of the Canadian Government that the contract will be delivered per the agreed terms and conditions, including respect for agreed timelines, quality and costs.

Our company, Aecon, is Canada's premier construction and infrastructure development company. We have been in business for 137 years, employ 12,000 people and have a proven track record of delivering landmark, large-scale infrastructure projects, including highways, hydroelectric dams, subways and airports.

Aecon specialises in delivering projects that matter in partnership with governments and in consultation with local community stakeholders. To date, we have been involved in the delivery of 29 P3s across Canada and internationally, with a proven track record in financing, developing, building, operating and maintaining large infrastructure, including airports. We pride ourselves in being a partner of choice and we have been consistently recognised as one of Canada's top employers.

Typically, construction cost overruns are one of the risks that can plague large public infrastructure projects, driving up financing costs and adding to the burden of government debt. Involvement of the Government of Canada, however, contributes a unique element of construction cost certainty and, with its AAA credit rating, will help the project to secure an investment-grade credit rating. These features and safeguards are not available to Bermuda through a typical tendering process, and will provide demonstrable savings and “value for money”.

Importantly, with a P3 model, capital costs for the airport redevelopment will be financed by private investors and lenders using airport revenues. This means airport users pay for the new infrastructure; not taxes or new government debt. Furthermore, the Government of Bermuda will always retain ownership of the airport and control as regulator and contract overseer.

In the same spirit of partnership, Bermuda has agreed to provide limited support to the project, including certain tax exemptions and a carefully structured minimum-revenue guarantee, both of which are necessary to make the project affordable. The tax concessions mean that Bermuda will forgo only certain tax revenue that would not exist without the project. Governments normally do not tax themselves and, as Bermuda will continue to own the airport, by not taxing the land and imported construction material, the Government is able to support and enable the project at no cost to itself.

The proposed minimum-revenue guarantee adds an element of stability and aligns the interests and commitments of the parties, enabling project lenders to provide lower cost financing. The guarantee is structured so as not to affect the sovereign rating of Bermuda. And, if triggered, payments under the revenue guarantee will be channelled through a special reserve account that pays interest and entitles Bermuda to participate in the revenues of the concession, thereby recovering the investment.

The planned redevelopment of LF Wade International Airport is an exciting opportunity for Bermuda, and Aecon is privileged to be a part of it. There is a lot to work to do to make it happen and we look forward to hearing the thoughts and contributions of all Bermudians.

• This is the first in a series of monthly articles that are scheduled to discuss the airport redevelopment plans.

• Steve Nackan is president of Aecon Concessions

Scene of change: LF Wade International Airport is set for redevelopment. (Photograph by David Skinner)
Steve Nackan, president of Aecon Concessions

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Published February 15, 2016 at 8:00 am (Updated February 15, 2016 at 6:38 am)

Airport may be critical turning point

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