San José, Costa Rica, since 1956

Airport Contract Agreement Finally Reached

Just over a year from now construction of JuanSantamaríaInternationalAirport’s main terminal will be complete. Three months later a new terminal housing Immigration authorities will be finished. And in 2008, construction will begin on a new domestic terminal.

This is all according to a new timeline established in a recently approved contract agreement to end three years of conflict between airport operator Alterra Partners and the government.

The negotiated agreement, also known as the contract addendum, was approved last week by the Technical Council of the Civil Aviation Authority (CETAC) after more than four months of analysis.

The addendum is expected to return financial equilibrium to the controversial contract that puts Alterra Partners in charge of the airport’s renovation and operation for more than 20 years.

However, the agreement faces a crucial step before it can go into effect. It must receive the seal of approval by the very institution that was the source of the contract dispute in the first place – the Comptroller General’s Office, which oversees all government contracts.

The multimillion-dollar contract dispute began in March 2003 as a result of a scathing report issued by the Comptroller regarding airport financing. Construction was halted after international banks funding the airport’s renovation suspended the final $30 million of Alterra’s $120 million loan until the dispute was resolved.

Minister of Public Works and Transport Randall Quirós assured last week that all of the Comptroller’s issues have been addressed.

The Comptroller has 45 days from Jan. 30, when the negotiated agreement was approved by CETAC, to either approve or reject the agreement. If the Comptroller does not approve the addendum, the parties could try to renegotiate the issues in question or give up on the contract altogether, in which case CETAC would resume control of the airport.

In addition to bringing financial equilibrium to the project – allowing Alterra to receive the remaining $30 million in its $120 million loan and eventually pay the loans back – the addendum resets the construction timeline and increases Alterra’s contract by one year to 21 years.

“None of these changes contemplates the government loaning money (to Alterra) or receiving less money in real terms than what was projected in the original offer,” Quirós said.

Construction Timeline

Under the new schedule, officials expect construction of the main terminal to be completed in May 2007. Part of this construction – including two new boarding gates with accompanying waiting areas – is expected to be complete Nov. 30, right before the start of the next tourist high season (December to April). The number of bathrooms in the gate area will also be doubled, Quirós added, saying this has been a “constant object of criticism” among airport users. By late February 2007, two additional boarding gates and waiting areas will be complete.

In August 2007, officials expect to open a new terminal building for 16 Immigration posts, bathrooms and commercial space. This will open space in the current building for 28 new check-in areas for airlines.

By December of next year, two final boarding gates with bathrooms will be completed. In addition, commercial space for stores and restaurants will increase by 50%, Quirós said.

In 2008, work will begin on a third stage of construction, including construction of a new domestic terminal, an additional increase of boarding gates, the relocation of the fire station.

The airport renovation also includes other non-passenger related projects, including construction of a new cargo ramp and an electricity substation.

Fair Share?

Of the airport’s total revenues, 47% will go to Alterra, amounting to $181 million, and 53% will go to the Costa Rican government, including $76 million for CETAC and an additional $73 million in reserve funds.

CETAC funds will be used for the development of infrastructure projects in airports around the country, Quirós said.

Initially, Alterra’s revenues will be greater because they will have to make a greater investment in construction, Quirós explained. In 2016, that will switch, and the government’s returns will be larger.

The dispute began in March 2003 regarding the amount Alterra is allowed to charge to airlines and companies operating in the airport to cover development and financing expenses (TT, March 28, 2003). The fees are often passed on to the public through plane ticket prices.

At one point, Alterra and CETAC agreed that $15.2 million could be charged. However, the Comptroller insisted the fee could not exceed $3.4 million and the government said the Comptroller had the last word. The parties have been at odds since.

Under the addendum, both parties recognize the $3.4 million figure. The $11.8 million difference is recognized in the overall financial equilibrium of the project.

A special fund of $7 to $9 million will be created to return payments inappropriately collected from airlines and airport users, Quirós said. Airlines can request an amount they feel they have overpaid, to be analyzed by CETAC. However, it is more complicated for the millions of passengers who have used the airport annually, the minister said.

Rather than try to find a way to return funds to them, “some type of infrastructure” will be built for all passengers, he said.

Alfredo Aguileta, director of Alterra, stressed that Alterra hardly wins with the addendum.

“It hasn’t been easy to come to this agreement. The investors have sacrificed,”

he said. “We hope this time it will be forever.

The country needs these kind of commitments to develop the infrastructure projects it wants to build.”


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