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Aecon won’t say if it will sell stake

Aecon Concessions president Steve Nackan

Canadian construction giant Aecon says it is “too early” to determine whether it will sell its stake in the company running Bermuda’s new airport once the project has been completed.

The firm spearheading Bermuda’s airport redevelopment was due to operate the last airport it built until 2041, but it pulled out of the facility 26 years early after selling its shares.

The $700 million Quito International Airport in Ecuador won awards after it was built by Aecon. But after agreeing to a 35-year concession term to first operate the capital city’s old airport from 2006 and then the new airport after it opened in 2013, Aecon completed only nine years of the term before cashing in.

In December last year, it completed the previously disclosed sale of its 45.5 per cent interest in the Quito International Airport concessionaire Quiport for $232.6 million to two other entities — a Colombian construction company and a Brazilian transportation firm. The deal ended Aecon’s involvement with Quito airport and a spokeswoman for the company confirmed yesterday that it was no longer operating the airport.

The company said in a statement on December 10 that the “monetisation of [its] investment [in Quiport] generates approximate net cash proceeds (after transaction costs and estimated cash taxes) of $195 million”. An article appeared in Canada’s National Post newspaper last summer when the sale was first agreed, headlined: “Aecon Group Inc finally sells Quito airport stake, and at a good price”. The piece said Aecon had been “looking to dispose of the airport since it opened in 2013” and that the sale was responsible for “bolstering Aecon’s balance sheet”.

Shadow transport minister Lawrence Scott raised the issue of the Quiport sale at a public meeting about Bermuda’s airport last September, prompting Aecon Concessions president Steve Nackan to state that it was typical of such arrangements. He said Aecon had financed, built and constructed the new airport and it was now suited to “long-term institutional ownership”.

“It is typical ... at this stage in an infrastructure project’s life cycle to see investments transition from the originating project sponsor, developer and builder to long-term institutional investors, and this transition is generally perceived as a further marker of a successful development project,” added Mr Nackan. He reiterated that yesterday, saying it was a natural occurrence for the developer to cash in its share in such a project within ten to 12 years. When Bermuda’s new $250 million airport opens, projected to be in 2020, it will be run by Project Co, a special-purpose project company similar to Quiport, in which Aecon will have the largest stake. The concession term for Project Co to operate the airport is 30 years.

The Aecon spokeswoman said the company’s precise stake in Project Co was still to be decided, adding: “Aecon will remain responsible for developing the deal and Project Co leadership. [It’s] too early to comment on when or if Aecon might sell and under what circumstances.”

A Bermuda Government spokesman told The Royal Gazette last September that any sale of Aecon’s stake would require the Government’s consent and it would give permission if the prospective new owner had the money, experience and expertise.

The spokesman said: “Subject to certain very narrow exceptions, the current development agreement requires Aecon Construction Group to be the joint owner and lead shareholder of the company that will be operating the airport throughout the construction of the airport and, thereafter, Aecon Construction Group must control the airport operating company.”

We asked the Government this week to provide details of the exceptions but it has yet to do so.

<p>Deal details</p>

The deal between the Bermuda Government, the Canadian Commercial Corporation and Aecon will involve airport revenues going to a company set up to finance and build the facility, then operate it for the next 30 years.

This special-purpose company, known as Project Co, will have Canadian construction firm Aecon as its lead investor but Aecon will not directly collect revenues raised by the airport. Such revenues — including departure taxes and a new airport improvement fee — will be ring-fenced so they can only be used for capital costs associated with the airport and for operations and maintenance.

The Bermuda Government says Aecon will make its money from construction revenue, payment for management services and any return on its equity investment in the project as the majority shareholder of Project Co.

The Royal Gazette asked the Ministry of Finance this week whether Project Co would have the power to raise airport fees over the 30-year concession term or whether that would remain the remit of the Government but we have yet to receive a response.

When Aecon built Quito International Airport in Ecuador, the issue of who could profit from airport fees became a bone of contention.

Aecon had a 45.5 per cent stake in the city’s airport concession, through its stake in Quiport, a company set up to build and run the airport. Quiport had a 35-year concession contract to collect all revenues from airlines, passengers and retail concessions from Quito’s airport but a 2009 ruling from Ecuador’s constitutional court found that airport revenue belonged to the public and not private-sector companies.

The court ruled that fees charged to airport users were taxes that could not be handled by a private company under the constitution, which was introduced in 2008, after Aecon struck its deal with the government. The dispute went to the International Centre for Settlement of Investment Disputes, but was resolved in 2011 without going to arbitration by that body.