PLP, OBA clash over airport
Bermuda will have to pay up to $16 million in October to cover lost airport revenues as a result of the Covid-19 pandemic, the Progressive Labour Party claimed yesterday.
The PLP said it would be the second payment to satisfy the minimum revenue guarantee present in the airport deal.
In August, the Bermuda Government transferred $5.77 million to a bank in New York set up by Aecon, the Canadian-based contractor, and Skyport, the airport's operating company, to satisfy the guarantee present in the contract signed by the then One Bermuda Alliance government.
Lawrence Scott, a PLP MP, told a press conference: “The biggest reason that we are liable for these payments is a lack of a robust force majeure clause in the contract.
“To be clear, there is a force majeure clause in the current contract, it just doesn't trigger a waiver of the guaranteed minimum regulated revenue requirement.
“Force majeure is a legal term that, basically, means if there is an act of God, like a flood, a major storm, a tsunami, or a pandemic, with a more robust force majeure clause we would have been able to receive forgiveness on the key requirements of the contract, including the minimum revenue guarantees.
“However, the current project agreement as it currently stands leaves us with only limited options, with transferring millions of dollars to an overseas bank account being one of them.”
Mr Scott said the PLP estimated that the additional payment would be between $12 million and $16 million.
He said that in 2019, when Bermuda had record air arrivals, passenger arrival numbers were approximately 5 per cent above the Regulated Revenue Guarantee threshold.
He added that the United Nations Agency does not forecast commercial air arrivals to return to 2019 levels for another four years.
Mr Scott added: “We have begun talks with Skyport to reduce the payment amounts by transferring only the funds that Aecon will draw down on (needed for debt payments) vs projected debt numbers. This we believe has the potential to save the Bermuda taxpayers millions of dollars this year alone,”
Mr Scott said that the Bermuda Airport Authority had negotiated aspects of the project agreement including the addition of a canopy for the passenger terminal building.
He said the authority also negotiated Skyport away from its decision to charge taxi drivers for collecting and dropping off passengers at the terminal.
Mr Scott said the authority negotiated to “actively and financially” participate in an Air Service Development designed to increase arrivals and explore new routes to and from the island.
Douglas DeCouto, OBA candidate for Warwick North Central, argued Mr Scott was wrong about the financial structure of the airport.
Mr DeCouto said: “The new terminal has to be financed either with increased government debt or from its own revenues. The OBA chose the latter option because the government already owed too much money.
“If the government had borrowed the funds to redevelop the airport it would still have had to pay the debt service to the lenders, plus the operating costs of the airport, including salaries and overheads, even if the airport was closed.”
He said it was generally acknowledged that a new airport was needed and said the OBA had inherited a $300 million annual deficit.
Mr DeCouto added: “If the PLP had left us some money we may have been able to use a different way to fund the airport, but we were not given that choice because the PLP acted with total abandon when it came to spending the people's money.”
He said the only reason the minimum revenue guarantee came into effect was because of the closure of the airport.
Mr DeCouto said: “The force majeure provisions are based on Canadian P3 precedent, now used to deliver hundreds of P3 projects, and generally considered to be the global standard for how these clauses are put together — including for optimal and proven bankability.
“The force majeure clauses have been subject to independent review and vetting by international legal council — for Aecon, for the Government of Bermuda (OBA) and for the international project lenders in Wall Street — and then again by LeighFisher as part of their PA review for the PLP Government in 2017-18.”
He added: “The OBA is proud of the airport. Bermudians will be proud of the new airport. Former tourism minister Zane DeSilva was clearly proud of the new airport when he took part in a roof-wetting ceremony.
“This project will come in on budget, unlike the PLP's projects which wasted tens of millions of dollars of the people's money in cost overruns and added to the public debt.”