The Agreement stipulates that the Government will enter into a 30-year concession agreement with a Special Purpose Entity, Bermuda Skyport Corporation Limited (Skyport).
Skyport will be owned by Aecon, holding at least 35% of the equity, and other third party shareholders. The Agreement will include both construction of the new airport as well as operations and maintenance of the Airport for the concession term, except for operations that Bermuda will retain, being air traffic control operations, meteorological services, airport fire & rescue services and ground electronics (“the Retained Government Services”).
The Government will lease existing airport land and facilities to Skyport for the 30-year term of the Agreement. The Government will retain ownership of the airport. From a timing perspective, the Agreement will provide that the lease will commence and the transfer the airport assets (e.g., equipment and furniture), will occur at Financial Close. Concurrently, labour force and responsibility for airport operations will also be transferred to Skyport at Financial Close. Skyport will be responsible for operating and maintaining the airport until the end of the concession term and the Quango will be responsible for providing Retained Government Services. The Agreement does not have any extension options, which means that at the end of the term, the operation of the airport, and all airport assets, will transfer back to the Government, subject to the Agreement’s handback standards.
The airport remains publicly owned. The Government of Bermuda is proposing that Skyport, designs and builds the airport. Through a lease agreement Skyport will also maintain and operate the airport for a set period of time.
During the concession term, Skyport will receive all revenues generated from the airport operations and will be responsible for the majority of airport-related operating expenses including employee remuneration, debt service and maintenance costs. At the end of the concession term, the airport terminal lease will expire and all accompanying assets will be transferred back to the 7 Government in good working condition and the Government will resume responsibility for all airport operations.
Through a revenue sharing agreement, Skyport will share revenues 50/50 with Bermuda once equity investors have recovered their initial investment.
In the project agreement, the Bermudian government is transferring a number of risks to the builder and its financing partner. Transferring these key categories of risks ensures the builder and not Bermuda is not liable for:
- Financial Risks - The contractor is responsible for securing financing to design and construct the airport.
- Design and Construction Risks - The contractor is responsible for all design coordination to ensure construction meets all design requirements. As well, the builder is responsible for meeting the scheduled completion deadline. If the project schedule needs to be accelerated to meet the completion deadline, the contractor assumes the associated costs, e.g. overtime labour costs. In addition, the contractor is responsible for cost overruns during construction, including those caused by fluctuating market conditions and costs resulting from unforeseen site conditions that cause construction delays.
- Maintenance and Operation Risks – During the term of the lease agreement, Skyport will be responsible for all costs to maintain and renew the airport asset. The project agreement will protect public interest and public ownership of the airport will be preserved. The value-for-money assessment demonstrated the P3 approach provides savings in cost.
- The project will provide a much improved facility with more services and more jobs. Construction will provide many community benefits, such as jobs and training opportunities, as well as economic stimulus.
The new airport terminal is expected to take approximately 40 months to build.