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Aecon Mulls Ecuador Court Ruling On Airport Fees

August 3, 2009 Leave a comment Go to comments

July 31, 2009

Aecon Group said on Friday it is studying a ruling from Ecuador’s constitutional court that could affect the Canadian construction company’s collection of fees from Quito Airport.

Aecon has a 45.5 percent stake in the capital city’s airport concession, through its stake in Corporacion Quiport, and is reinvesting that cash to help finance the construction of a new airport for Quito.

Quiport has a 35-year concession contract to collect all revenues from airlines, passengers and retail concessions from Quito’s airport until 2040.

Aecon and joint venture partner Andrade Gutierrez Constructores are half way through the USD$414 million construction of a new airport, with completion expected in October 2010.

The July 29 court ruling says airport revenue belongs to the public and not private sector companies. The decision is based on Ecuador’s new constitution, which was not in place when the airport deal was signed, said Macquarie Research analyst Avi Dalfen.

“While we are still analysing the ruling, it is important to remember that this ruling in no way addresses the Ecuadorean government’s intentions toward the new Quito airport project,” Aecon chief executive John Beck said in a statement.

“I am hopeful that we will receive a clear indication soon that the government intends to respect all of its contractual obligations so that we may complete this important infrastructure project.”

Investors seemed unfazed by the ruling, knocking just 1 percent off Aecon shares, which closed at CAD$10.09 on the Toronto Stock Exchange on Friday.

“The court ruling is one thing, but ultimately it’s up to the government to decide what’s going to be happening,” said Genuity Capital Markets analyst Maxim Sytchev.

“That’s really the next milestone that investors and the market is waiting for: how the Ecuadorean government is going to react to this ruling. In the past, they have supported the concession model.”

The government and companies may find a “middle-ground solution”, he speculated, in which some airport fees become public property, for example.

“We are still very much in the early innings and all will depend on whether the Ecuadorean government will retract its previous support for the concession,” Sytchev said.

(Reuters)