Alterra Ordered to Restart Airport Renovation

December 2, 2005

AIRPORT operator Alterra Partnershas been ordered to restart the renovationof Juan Santamaría International Airport.The project has been suspended for nearlythree years because of a contract dispute.Minister of Public Works andTransport Randall Quirós announcedTuesday that Alterra would have 30 workdaysto restart the more than $100 millionrenovation. The announcement followed adecision Monday by the ComptrollerGeneral’s Office that the government mustorder the renewal of the project.Despite the decision, ExecutiveDirector Mónica Nagel reiterated Mondaythat Alterra will continue remodeling theairport only when financial equilibrium forthe project has been established, suggestingthat the conflict between Alterra andthe government that began in March 2003will continue.Since 2001, Alterrahas held a 20-year contractto operate and renovatethe airport, includingthe construction of anew terminal, additionalboarding gates and a runwaywhere planes cantaxi. Construction washalted in 2003 when thecomptroller issued ascathing report regardingthe airport’s financing,particularly questioningthe fees Alterra could charge airport users.IN response to this report, issued inMarch 2003, the International FinancingCorporation (IFC), the financing arm ofthe World Bank, announced it would freezefinancing for the airport’s renovation, suspendingthe final $30million of Alterra’s$120 million loanuntil the dispute wasresolved. Accordingto an Alterra statement,the comptroller’sreport changedthe financial conditionsof the contract,creating uncertaintyas to whether Alterrawould be able tomake timely paymentson the credit ithad already received.For the past two and a half years,Alterra and government officials havebeen in and out of arbitration and roundsof negotiation. They finally announcedearlier this year that they had reached anagreement to bring financial equilibriumto the controversial contract. That agreementwas recently reviewed by theTechnical Council of the Civil AviationAuthority (CETAC) and still awaits necessaryapproval by the ComptrollerGeneral.All along, Minister Quirós and Alterraofficials have said that airport constructionwould restart once the agreement – calledthe contract addendum – is given thethumbs-up by the comptroller.However, the office’s recent orderchanges that timeline.The decision is based on an arbitrationcourt’s Nov. 2 ruling that Alterra did notfollow established procedure that allowsthe project to be suspended. Furthermore,the fact that Alterra does not have funds tocontinue renovation is Alterra’s problemand is not just cause for halting renovation,according to the comptroller’s office.THE comptroller’s office has alsoasked CETAC to determine the peopleresponsible for the suspension of theworks, Quirós said.The Minister said that although Alterrahas myriad avenues to appeal the ministry’sorder to restart construction, he isconfident Alterra officials will show the“good will” to restart the works while thecomptroller reviews the contract addendum,instead of waiting until it has beenapproved as previously planned.“I think the government, as well as thecomptroller’s office, would look favorablyupon it if (Alterra) restarts these works inanticipation of the addendum beingapproved,” he said.But Nagel said “it will be the investorsand the international bank who finance theproject who will decide whether to continuethe works without financial equilibrium– which is a constitutional right of thecompany – without an addendum approvedby the Comptroller and without legal securitythat, this time, agreements will berespected.”Representatives of the IFC will arrivein Costa Rica Monday to analyze the proposedfinancial equilibrium. In addition,Nagel will talk to Alterra associates inMiami about the addendum this weekend.The idea is that all of the partiesinvolved in the airport contract give theagreement their thumbs-up before it is sentto the Comptroller General for the finalapproval, according to Quirós. He anticipatessending the addendum to the comptroller’soffice not later than Dec. 10. Theoffice will then have 45 days to evaluate it.

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