Airport Can’t Yet Spread Its Wings

February 20, 2009

After years of delays, the long awaited expansion of JuanSantamaríaInternationalAirport was dealt another setback Tuesday when Costa Rica’s Comptroller General rejected the transfer of operations to a U.S. firm because of a lack of funding.

Houston Airport System Development Corporation (HASDC) was set to assume control of Juan Santamaría, in Alajuela, northwest of San José, pending the arrangement of financing. But last week U.S.-based bank J.P. Morgan backed out of a $100 million guarantee because of the worsening international financial crisis and the delayed negotiations with the Public Services Regulatory Authority (ARESEP) regarding new airport tariffs.

Public Works and Transport Minister Karla González, currently in Washington meeting with potential creditor banks, sought to continue the transfer with HASDC providing $30 million of its own money to finance construction efforts. But those funds are considered insufficient to finance the 23,000- square-meter expansion, which includes new check-in, boarding and Immigration areas.

HASDC would also have paid the $10 million in fines current airport operator Alterra owes the government for construction delays.

The saga of Juan Santamaría has been a long one. Alterra, a subsidiary of Bechtel Corporation, took over operations at Juan Santamaría in 2001. It began construction efforts, including a revamped runway and terminal remodel, in 2003. That year, however, equity concerns caused the International Finance Corporation (IFC), a branch of the World Bank, to freeze the remaining $90 million of the total $120 million IFC had agreed to provide to finance the project.

Construction halted completely in 2007 after Alterra’s partners failed to bring in sufficient financial support, putting renovation efforts in limbo and building tension between the airport operator and the government.

A year ago, the government gave Alterra 60 days to restart construction efforts at the airport. In May, Alterra announced it would sell the concession rights to HASDC, which includes ADC Management of Canada and Brazilian construction company Andrade Gutiérrez, pending the approval of the Costa Rican government. The government accepted HASDC’s proposal in September, but negotiations with ARESEP dragged on as the international financial crisis took hold.

For now, the government is placing its hopes on González’s efforts to secure financing with a new creditor bank. On Tuesday, she met with representatives of the Inter-American Development Bank and the Overseas Private Investment Corporation, an independent agency of the U.S. government that assists U.S. business in investing abroad. If nothing materializes, the Costa Rican government may have to step in and assume control of the airport itself, with $20 million in initial funding of its own.

“We thought that the new company (HASDC) would come to solve the delay that our country has suffered for years and despite the fact that this is a serious company, as a government we have a responsibility,” Presidency Minister Rodrigo Arias told the daily La República. “In a matter of two weeks or 10 days we will have a decision.”

While the future of Juan Santamaría’s financing and operations is very much up in the air, one thing is a near certainty, according to reports. Construction of the airport’s main terminal, which officials said last week would resume in April, will be delayed indefinitely.

Airport Delay Timeline

• 2001 Alterra Partners, a subsidiary of Bechtel Corporation, takes over operations at JuanSantamaríaInternationalAirport.

• 2003 Construction begins on airport renovation, including a revamped runway and terminal model. Later that year, however, the International Finance Corporation freezes $90 million of remaining financing for further expansion. • 2007 Construction halts completely after Alterra’s partners fail to bring in sufficient financial support.

• 2008 The government gives Alterra 60 days to resume construction efforts. In May, Alterra announces it would sell concession rights to U.S.-based consortium Houston Airport System Development Corporation (HASDC). Government approves sale in September, but negotiations over fees and financing drag on.

• 2009 U.S.-based bank J.P Morgan withdraws $100 million guarantee, citing the growing global financial crises and the stalled negotiations. A week later, Costa Rica’s Comptroller General pulls the plug on the concession transfer to HASDC because of the lack of financing. Public Works and Transport Minister Karla González travels to Washington, D.C., to find a new creditor bank.

–Patrick Fitzgerald

 

 

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