Airport Financing Remains Up in the Air

ALTERRA Partners Costa Rica, operator of JuanSantamaríaInternationalAirport since 2001, faces a critical financial situation because it is unable to produce sufficient revenues to pay its debts, warned a government source on Tuesday.

“In effect, the airport contract at this moment is in a critical stage,” said Minister of Public Works and Transport (MOPT) Javier Chavez to Radio Monumental.

The situation arose because Alterra Partners, which owns a renewable 20-year concession to operate and renovate the airport, requested increased airport tariffs to generate more revenues, Chavez explained.

THE company has asked the government to approve increased tariffs to recoup more than $18 million it says it has spent for development and financing to guarantee more than $120 million in credit from 14 international banks for the airport’s renovation projects (TT April 16).

The amount allotted for this expense in the original bid and official contract for the project is $3.4 million.

The Technical Council of Civil Aviation (CTAC) later determined that the maximum amount of these expenditures that could be recuperated through tariffs, which are collected from airport users, was $15.2 million.

Last week, Chavez asked the Comptroller’s office to resolve the issue.

THE Comptroller General’s Office announced Monday that $3.4 million is the “top price” – the maximum cost that can be passed on to tariffs and not harm the competitiveness of the airport.

The Comptroller’s Office declared in its report that “whatever other additional costs there are will correspond to the managing agent.”

In March 2003, the Comptroller General’s Office slammed Alterra for what it said was excessively increasing airport fees the previous year.

These fees, charged with approval from the Technical Council of Civil Aviation (CTAC), generated revenues of more than $21 million (TT, March 28, 2003). The Comptroller said Alterra overstated construction and operation costs and ordered the error corrected.

BUT this week, Chaves warned the entire project is in jeopardy because of the financing issue.

“The contract is financially unbalanced. That is to say, the airport does not generate sufficient revenue to pay the loans that (Alterra) has assumed and, therefore, the international banks are not going to continue lending the other $30 million that needs to be received,” explained the Minister.

Alterra, a joint venture of Bechtel Enterprises of the United States and Singapore Changi Airport Enterprise, obtained credit for $120 million. Of this, $30 million has yet to be disbursed to Alterra.

“IF these loans do not come, they cannot complete the construction of the new terminal and new boarding areas,” Chavez said. “It is of the highest national interest that the contract returns to financial balance.”

Chavez said they will now look for alternative ways to create financial balance and resolve the situation.

“The problem that we now have is of a technical nature, not political. It will be the experts who will have to say how we can generate additional revenues to pay the banks,” said Chavez.

Chavez said he trusts that soon they will find “an exit that will permit Costa Ricans to have a first-class airport.”

The Legislative Assembly has created a commission to investigate alleged contract violations by Alterra and any anomalies in the awarding of the contract. The contract includes the possibility of annulling the concession under certain circumstances.

ALTHOUGH company officials hinted at abandoning the project when Alterra was criticized for charging excess fees last year (TT, June 27, 2003), response to the Comptroller’s decision this week was measured.

“Alterra has acted, and will continue to act, with absolute respect for the decisions taken by the Comptroller and CTAC about the themes concerning the contract,” the company said in a statement.

The company did, however, add that the suggestions of contract violations are “especially serious by damaging the trust of international credit organizations in Costa Rica, which could have repercussions on the financing of future infrastructure projects in the country.”

JUAN SantamaríaInternationalAirport was recently named the third best airport in the world in the under 5 million passengers a year category and fourth overall in the Americas (including North America) by the International Air Transport Association (IATA).

The rating was based on the quality of the services provided by the airport as well as other aspects, for example, the attentiveness of the airport’s staff.

“The results are a sign that we’re walking in the correct direction,” said Alterra Partners General Manager Al Romeu.

“…May 5 will be the third anniversary of Alterra as operator of JuanSantamaríaInternationalAirport,” Romeu said in a statement. “Nearly 36 months after having begun operations, the accomplishments reached in every section of the airport’s areas fill us with pride and satisfaction.”

The project is the first attempt at assigning a major public works project to a private company in Costa Rica since U.S. citizen Minor Keith was charged with building the railroad from San José to the Caribbean in the 19th century.