Aecon Group Inc. (TSX: ARE) announced today that it has reached an agreement regarding issues affecting the Quito International Airport project that had arisen following a ruling earlier this year by the Constitutional Court of Ecuador.
Under the agreement, which is subject to approval by the Constitutional Court of Ecuador and a number of other closing deliverables, an arrangement has been found which addresses the prior Court ruling and which resolves a number of other issues important to the investors, the project's lenders and the Municipality.
Other key elements of the agreement include:
- Project lenders will resume funding for construction of the new
- Corporacion Quiport S.A ("Quiport"), which holds concession rights to
both the existing Quito Airport and the new airport currently under
construction, will, in addition to the currently contracted
concession fees, pay the Municipality of Quito 18% of Quiport's net
income plus $500 thousand per year. This change will effectively
reduce the earnings Aecon reports from the project by approximately
18% and increase the Municipality's effective economic interest to
the equivalent of 26%.
- A schedule of fee increases was established for "Regulated" fees
charged by Quiport at the airports (including airline landing fees
and passenger departure fees). The schedule, which respects the
maximums established in the original concession agreements, provides
Quiport with increased certainty regarding the revenues expected to
be derived from the concession, and does not limit Quiport's ability
to charge market fees for "Non-regulated" items such as duty free and
car rental concessions, parking, food services etc.
- It was agreed that a new completion date and a new construction price
would be set for the project, reflecting the delays and increased
costs associated with the slowing of construction activity following
the Court ruling earlier this year.
- A deadline of January 29, 2010 was set for receipt of Court approval
and finalization of all conditions and deliverables relating to the
settlement (including the construction issues noted above).
The agreement was negotiated among the various parties involved in the Quito International Airport project, including the Municipality of Quito (for the Ecuadorian authorities), the Canadian Commercial Corporation ("CCC", an agency of the Government of Canada that holds the contract to construct the new Quito Airport), and the project lenders, as well as Aecon and its partners in Quiport.
Prior to the effect of this agreement, Aecon has a 42.3% economic interest in the Quito airport concession through its stake in Quiport. The grantor of the concession on behalf of the Municipality of Quito is Corporacion Aeropeurto y Zona Franca del Distrito Metropolitano de Quito (CORPAQ). The new airport is being constructed under a contract signed between CORPAQ and the CCC. The CCC, has subcontracted 100% of the construction work to Aecon who in turn has subcontracted the work to a 50/50 joint venture consisting of Aecon and Andrade Gutierrez Constructores, one of the largest construction companies in Brazil.
The project's senior lenders are: USA-based Overseas Private Investment Corporation, Export-Import Bank of the USA and the Inter-American Development Bank as well as Export Development Canada (EDC).
The information in this news release includes certain forward-looking statements. These statements are based upon assumptions that are subject to significant risks and uncertainties which are generally described in the Final Prospectus filed on September 22, 2009 and available on SEDAR at www.sedar.com. Although Aecon believes that the expectations reflected in forward-looking statements are reasonable, it can give no assurance that the expectations of any forward-looking statements will prove to be correct.