Overview Of Airport Redevelopment Transaction

November 16, 2016

On Monday, the Minister of Finance Bob Richards provided Parliament with an overview of the airport re-development agreement.

The document says, “The Agreement stipulates that the Government will enter into a 30-year concession agreement with a Special Purpose Entity [“Project Co”] to be created. Project Co will be owned by Aecon, holding at least 35% of the equity, and other third party shareholders.

“The Agreement will include both construction of the new airport as well as operations and maintenance of the Airport for the concession term, except for operations that Bermuda will retain, being air traffic control operations, meteorological services, airport fire & rescue services and ground electronics [“the Retained Government Services”].

“The Government will lease existing airport land and facilities to Project Co for the 30-year term of the Agreement. The Government will retain ownership of the airport.”

The 15-page document is below [PDF here]

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Comments (15)

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  1. San George says:

    Who owns the other 65% (Others)? The project has already begun; why advise Parliament – ram rod Bermuda.

  2. Say Whaat? says:

    Overview, huh? What’s that saying? The devil is in the details.

  3. Guy Smiley says:

    LMAO!!! So the people of Bda retain all of the non-revenue generating pieces of the pie.

    • K1200 says:

      Guy Smiley, there are two sides to a balance sheet: Revenue and Expenses. The present expenses to maintain the dilapidated airport terminal are huge and wipe out any profit from revenue. Having someone else build a new terminal and then operate and maintain it at no cost to Bermuda is a net gain, not a loss.

      • Curious Mind says:

        No Cost – LMAO!

        Clearly you didn’t read the document above.

      • Cynical says:

        It’s just so obvious. People see what they want to see, instead of making up their own minds. Perhaps the PLP plan of dumbing down the population is working.

      • Guy Smiley says:

        No cost? We pay the fire and rescue team. We pay the air traffic control costs. We pay the ground electronics. There will also be an increase in ticket fees (of course they want a return). There will be costs and no revenue. If it’s theirs for 30yrs, let it be theirs and let them assume ALL costs.
        We do need a new airport. But this deal has so much wrong with it and it’s being shoved down our throats. Even the size of the project doesn’t make sense. And it doesn’t include the cargo terminal that we know needs replacing.
        So if 65% is “other” investors why not float it openly to the public? I’d like a share. I’m betting this thing turns a fantastic return. No I doubt we would be able to raise the balance locally. It at least the public could benefit and maybe feel more a part of it.

      • Bermuda is not a main hub, we spend 2 hours maximum in airports and were making Canada rich for 30 years while our children will be paying out of their @$$3$.

        • Ringmaster says:

          Well at least they know what it’s like to pay through their @$$3$ as they are already paying for the massive debt incurred by the PLP. By the way, this was not due to the recession as revenue has not fallen very much. It is due to massive expenditure because the Government became an employment agency to reduce unemployment.

    • Build a Better Bermuda says:

      What about the private aircraft terminals, the power generating plant that is expected to be built on the ‘Finger’, freight aircraft handling… and any other future use of the all the property space that isn’t being used for the airport operations. What we retain is far from useless

      • wahoo says:

        We retain the solar plant on the wing.

      • Guy Smiley says:

        The power generating plant, aka solar farm on the finger is because we will have to pay the electric bill for the new airport. We won’t make money on that. That airport is going to eat up electricity. The solar farm itself is going to cost a pretty penny. Prob have a payoff of 30yrs too. So much for not adding to our public debt. What a joke.

  4. Need Peace says:

    If you start wrong, you end wrong!

    All that fancy talk for YOU ARE GETTING SCREWED BERMUDA.

    Car rentals included in concession agreement? Would they be the two seater vehicles? You can’t make this stuff up!

  5. Johnt says:

    It seems we all agree that we need a new airport but the problem is we don’t have a spare $267m (or $514m if we go with the 2008 plan) to build an airport so what do we do? Borrow money, raise our debt ceiling (again), threaten our credit rating and end up paying even more interest? Let’s be honest excessive borrowing is the reason we are in our current position.

    This leaves a PPP type deal as pretty much the only option (unless we sell it off entirely to the private sector). The Projectco raises the money builds (taking on the risk) the airport and maintains it for 30 years in return for a revenue (yes they need to be paid as would the banks if we borrowed the money). The Project Co takes on the risk of cost overruns and reduction in revenue. The government guarantee ONLY kicks in if the revenue is insufficient to repay the debt and even then it only picks up the difference. On the flip side of this the government will have a 50% share of excess profits (would be nice to see when this kicks in). It would have been nice to see a tender but these take time (think how long it has taken with an agreed partner then add a couple of years to facilitate a tender) and cost all the while we would be bearing the cost of the existing airport. As they have previously argued, the Government decided the cost of a tender outweighed the benefits, it may not be popular but we elect our politicians to make these decisions. Yes there is cost involved as there is with all options do but the capital expenditure and debt repayment does not affect our balance sheet

    • Guy Smiley says:

      Very well stated and I agree for the most part. I don’t like how this partner was selected but I can buy into it. What I cannot buy into is the size…maybe I can buy into it but it has to be explained. There has been NO REAL conversation on WHY we need an airport of this size. HOW it compares to other airports around the world. HOW many passengers it can handle. WHAT our projections are. Really it sounds like this is a base rate that the developer put out there. First there was a number and then there was a design. I could be wrong and I would accept that, but as it stands the airport is not far from double what we need.