Deal lands at $1.8B

The Denver Post - - FRONT PAGE - By Jon Mur­ray

$750 mil­lion to $770 mil­lion

To cover pri­vate part­ner Fer­rovial’s debt re­pay­ment, fi­nanc­ing costs and re­turns for its in­vestors.

$479 mil­lion

In “progress pay­ments” dur­ing the four-year de­sign and con­struc­tion phase. That’s 74 per­cent of the $650 mil­lion ren­o­va­tion cost.

$430 mil­lion

In op­er­a­tions and main­te­nance pay­ments to Fer­rovial for 30 years to pay ex­penses for the con­ces­sion spa­ces Fer­rovial con­trols.

Up to $120 mil­lion

“Owner’s contin­gency” that DIA would cover in case of un­fore­seen is­sues and chang­ing in­dus­try stan­dards over the next four years.

Den­ver In­ter­na­tional Air­port has set­tled on a com­plex, $1.8 bil­lion con­tract with a part­ner that would per­form a four-year ter­mi­nal ren­o­va­tion and over­see new con­ces­sion spa­ces for the fol­low­ing three decades.

DIA of­fi­cials this week dis­closed the bot­tom-line value of the pub­lic-pri­vate part­ner­ship, which is much higher than es­ti­mates that were given when ne­go­ti­a­tions were in flux. The pub­licly known value was char­ac­ter­ized by DIA’s top brass in early June as “more than $1 bil­lion” and then later by the air­port’s ma­jor air­lines as $1.3 bil­lion. The fi­nal fig­ure landed $500 mil­lion higher.

The air­port has be­gun de­liv­er­ing what a spokes­woman said could reach 15,000 pages of con­tract doc­u­ments to Den­ver City Coun­cil mem­bers.

Ac­cord­ing to those doc­u­ments, the cost of the ac­tual ren­o­va­tion would be $650 mil­lion, with the rest of the costs com­ing in the three decades to fol­low.

Air­port of­fi­cials have worked for years to ce­ment the deal for the ter­mi­nal, and the prospect has stirred up con­tro­versy. They have faced re­cent pub­lic push­back from DIA’s ma­jor air­lines over costs they might bear, con­cerns about the project’s scope and other is­sues. Now DIA will be at the mercy of coun­cil mem­bers who have voiced a heavy share of skep­ti­cism to­ward the deal.

In short: Should an up­grade of the 22-yearold Jeppe­sen Ter­mi­nal be cou­pled with such a com­plex, decades-long oper­at­ing ar­range­ment that gives a pri­vate part­ner the power to ink con­tracts with restau­rants and shops and con­trol part of the ter­mi­nal?

“The is­sue that I have with this is that through this con­tract, we are — the coun­cil is — sur­ren­der­ing for 34 years our char­ter re­spon­si­bil­ity to do con­tracts for (ter­mi­nal) con­ces­sions and pos­si­bly some other mat­ters at the air­port,” Coun­cil­man Kevin Flynn said. “And so this is a oneshot deal. I’m not nec­es­sar­ily op­posed to do­ing that, but I need to know the pa­ram­e­ters that we set in this con­tract are the right ones.”

The main ob­jec­tives of the Great Hall ter­mi­nal project are to in­crease ca­pac­ity as air­port traf­fic nears 60 mil­lion pas­sen­gers a year and to mod­ern­ize and speed up se­cu­rity screen­ing. The project would re­lo­cate the two main screen­ing check­points up­stairs to the north ends of the tick­et­ing level, in part to ad­dress se­cu­rity vul­ner­a­bil­i­ties, while con- sol­i­dat­ing tick­et­ing coun­ters on the south ends.

On the main floor, space now used for the north screen­ing area would be used to cre­ate more mon­ey­gen­er­at­ing food and re­tail out­lets, which pas­sen­gers would en­counter af­ter pass­ing through se­cu­rity and on their way down to the trains to the con­courses.

The deal de­tails 30 years of pay­ments from DIA to a team led by Madrid-based Fer­rovial Air­ports for fi­nanc­ing and oper­at­ing costs — start­ing at $24 mil­lion a year — as well as profit-shar­ing from the new con­ces­sions spa­ces that Fer­rovial would over­see.

DIA would re­ceive 80 per­cent of that rev­enue (es­ti­mated at $8 mil­lion in 2022 and $10 mil­lion in 2023), while main­tain­ing con­trol over other ter­mi­nal con­ces­sions out­side the main-floor area that’s ceded to Fer­rovial.

Over­all, air­port of­fi­cials say the $1.8 bil­lion in costs to DIA over more than three decades would break down this way:

•$479 mil­lion in “progress pay­ments” that DIA would make to Fer­rovial dur­ing the four-year de­sign and con­struc­tion phase. That makes up 74 per­cent of the $650 mil­lion ren­o­va­tion cost, with Fer­rovial’s team pro­vid­ing $171 mil­lion.

•Up to $120 mil­lion in “owner’s contin­gency” that DIA would cover in case of un­fore­seen is­sues and chang­ing in­dus­try stan­dards in the next four years, ac­cord­ing to a con­tract sum­mary.

•$430 mil­lion in op­er­a­tions and main­te­nance pay­ments to Fer­rovial for 30 years af­ter the ren­o­va­tion is com­plete, to pay ex­penses for the con­ces­sion spa­ces Fer­rovial con­trols.

•$750 mil­lion to $770 mil­lion in in­stall­ments over those 30 years to cover Fer­rovial’s debt re­pay­ment, fi­nanc­ing costs and re­turns for its in­vestors. To­gether, the an­nual cap­i­tal and op­er­a­tional pay­ments to Fer­rovial — to­tal­ing about $1.2 bil­lion — make up “sup­ple­men­tal pay­ments” the con­tract re­quires from DIA.

Air­port CEO Kim Day last month por­trayed the part­ner­ship as a chance to com­bine sev­eral needed ren­o­va­tion projects into one, stream­lin­ing the con­struc­tion work “in an in­te­grated way” for an up­front price that pro­tects DIA from cost over­runs.

A mov­ing tar­get

The cost for DIA un­der the pro­posed deal is more spe­cific than the “more than $1 bil­lion” es­ti­mate that Day con­veyed in early June, when the con­tract was still un­der ne­go­ti­a­tion, and much more than the $1.3 bil­lion that the air­port’s ma­jor air­lines cited in a June 21 let­ter ob­ject­ing to the project. An air­port spokesman did not dis­pute the lat­ter fig­ure at the time.

DIA of­fi­cials now say that com­po­nents of the com­plex deal were in flux through­out June, but air­port and Fer­rovial team rep­re­sen­ta­tives largely have pinned down the fig­ures now that that ne­go­ti­a­tions are com­plete.

In com­ing weeks, coun­cil mem­bers will be charged with scru­ti­niz­ing the vo­lu­mi­nous Great Hall deal with Fer­rovial’s team.

The agree­ment leaves a lot for coun­cil mem­bers to digest and con­sider.

The nearly 15,000-page doc­u­ment will in­clude a main 157-page “devel­op­ment agree­ment” that de­tails the back­bone of the pub­lic-pri­vate part­ner­ship, said air­port spokes­woman Stacey Stegman. It’s also ac­com­pa­nied by more than two dozen ap­pen­dices so far, with others still be­ing fi­nal­ized Wednes­day and not yet re­leased.

Flynn be­gan look­ing at the con­tract Tues­day night, and he cred­ited DIA con­tacts for work­ing to iron out some tech­ni­cal is­sues he faced ini­tially.

“We’re pro­ceed­ing on sched­ule,” Stegman said. “This will go to the coun­cil’s busi­ness devel­op­ment com­mit­tee next Wednes­day, and we’re hop­ing for ap­proval and for it to make its way through the coun­cil process and then to pro­ceed to the mayor.”

Ad­vance­ment by the com­mit­tee next week would put the con­tract on track for ap­proval on the coun­cil floor Aug. 7, but it’s likely at least one mem­ber will ask for an­other week or more be­fore the vote.

Short time­line

With a con­trac­tual dead­line of Sept. 1 to strike a deal, Day and other of­fi­cials hope for a fa­vor­able vote in the next six weeks. With­out ap­proval, the air­port would pay a $9 mil­lion ter­mi­na­tion fee to Fer­rovial.

Of­fi­cials are sure to field a flurry of ques­tions that al­ready have been in­ten­si­fy­ing since the air­lines spoke out col­lec­tively June 21, spark­ing a pub­lic bat­tle with DIA of­fi­cials over the mer­its of the project. Those prob­a­bly will fo­cus on the terms of the deal, the ini­tial project de­signs — some coun­cil mem­bers have ques­tioned if a post­se­cu­rity con­ces­sion area makes sense — as well as the larger ques­tion of whether DIA’s pub­lic-pri­vate part­ner­ship deal is the right ap­proach.

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