Monday, October 29, 2012

Talks on US$200M airport proposal

The Canadian government-owned company’s proposal for Owen Roberts International Airport involves a capital investment of US$200 million from private sources in order to double the capacity of the Grand Cayman airport and extend the runway, in exchange for a 30 to 40 year concession contract.

Last week, representatives from Canada and the Cayman Islands-based Paramount Group held three days of talks with officials from the Cayman government and 
business sector.

The proposal by the Canadian Commercial Corporation – the Canadian government’s international contracting and procurement agency – follows the same concession structure it used in an ongoing US$700 million Quito International Airport project in Ecuador, according to a copy of the presentation the Canadians made to the Cayman Islands Airports Authority, provided to the Caymanian Compass by Paramount.

Concession

According to the presentation, “An airport concession is not a Privatization or Ownership of the asset in a Concession is 
retained by the CIAA”.

“A concession is solely the limited transfer of some or all of CIAA owned functions to the private sector for a prescribed period of time, putting an obligation on the concessionaire to finance, build and operate that asset over the period”.

“In return for this obligation to operate the asset and the obligation of payment to government of concession fees over the period of the concession, the concessionaire receives a right to collect both aeronautical and non-aeronautical revenues associated with the asset and an obligation to use these solely for the project”, the 
presentation continued. 

Project details

The Canadians propose to mobilise about US$200 million 
in private development capital for the project, with the majority of construction work to be carried out by Caymanian-owned companies. The proposal includes “a significant upfront payment to the Cayman Islands” of at least US$30 million, plus annual shared revenue of US$7 million to US$13 million to the airports authority.

The Canadian government would guarantee the group follows through on contract terms, on both deadlines and budget.

The project involves doubling the capacity of the passenger terminal building, extending the runway onto land reclaimed from North Sound, otherwise upgrading and improving existing runway and taxiway surfaces, new staff parking, a new northeast perimeter road, and a new general aviation apron (to be provided by a third party).

Participants during last week’s discussions included the airports authority, tourism association, Cayman Enterprise City, Chamber of Commerce, Civil Aviation Authority, auditor general and government, according to a news release from Paramount.

“The Canadian team is proposing a privately financed, long-term airport concession that will not require any government funding. The proposal includes a significant upfront payment to the Cayman Islands, a healthy ongoing revenue share to the CIAA, material fiscal savings to the Cayman Islands by transitioning civil servants to the private sector and an overall proposed project investment of approximately US$200M, in addition to the operation and continuous improvement of the airport facilities for a period of 30 to 40 years,” according to the news release.

Background

In August 2011, Cayman Islands Premier McKeeva Bush announced that Cayman government had signed an agreement with the Canadian agency to explore redeveloping the airports in Grand Cayman and the Sister Island of Cayman Brac.

In September 2012, the airports authority signed a contract with DSS Contractors to do preliminary work on expansion plans for the Charles Kirkconnell International Airport in Cayman Brac. Further work to accommodate nonstop outgoing international flights is expected 
to begin soon.

In late April, the airports authority applied to the Development Control Board for permission to build two additions to the Cayman Brac airport at an estimated cost 
of CI$2.5 million. 


http://www.compasscayman.com

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