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By Alexandra Alper
MEXICO CITY (Reuters) – Spanish construction firm Ferrovial SA (FER.MC) may cancel its plan to bid jointly with cash-strapped local builder ICA for a contract to build a $ 3.5 billion (2 billion pounds) terminal building for Mexico City’s new airport, people familiar with the matter said.
The Spanish builder is weighing an exit from a “memorandum of understanding” with Empresas ICA SAB de CV (ICA.MX), two sources said, as the Mexican firm struggles under 67.617 billion pesos ($ 3.74 billion) in debt.
The joint bid memorandum was signed by both companies in Madrid in July 2015.
Two of the sources, who asked for anonymity because they had not been authorized to discuss the situation, said Ferrovial has reached out to other companies seeking possible partners to form a new consortium to bid on the terminal.
Ferrovial declined to comment.
A spokesman for ICA also declined to comment, saying by email that “joint participation agreements for projects establish confidentiality clauses that we should respect.”
Ferrovial, which won a 2010 contract to build a terminal at London’s Heathrow Airport for around 800 million pounds, would be well-placed to win bidding for the Mexican project under ordinary circumstances.
But the tie-up with ICA has cast a shadow over Ferrovial’s chances of building the futuristic terminal, designed by British architect Norman Foster and billionaire Carlos Slim’s son-in-law Fernando Romero.
The terminal is part of a 169 billion peso ($ 9.34 billion) airport project aimed at turning Mexico City into a major regional hub.
Securing a project like the airport terminal would be a massive boon for ICA. But it has defaulted on about $ 60 million in interest payments since December, raising doubts about whether it could shoulder its part of the financial burden for building the terminal, which is set to open in 2020.
The call for bids for the project, which was published last week, requires bidders to have net working capital worth at least 8 percent of the cost of the work they expect to complete in the first year of construction.
Interested parties must file their proposals by Nov. 21 and the winning bidder is expected to be announced on Dec. 9, according to the tender’s ambitious timeline. It calls for work on the project to begin on Dec. 20.
Two sources close to the project have estimated the cost of the terminal construction at around $ 3.5 billion.
ICA recently replaced its chief executive and hired financial advisory firm Rothschild to come up with a debt restructuring plan by February. But it has yet to release the plan and Reuters reported that it is eyeing a pre-packaged bankruptcy filing for some of its subsidiaries.
The airport project, unveiled in 2014, is the signature infrastructure project of President Enrique Pena Nieto’s administration. The new terminal is expected to handle some 50 million passengers annually.
Aimed at boosting capacity at Mexico’s over-saturated Benito Juarez International Airport, it has survived successive government spending cuts as sinking oil prices have crimped public expenditure.
($ 1 = 18.0900 Mexican pesos)
(Additional Reporting by Robert Hetz in Madrid and Gabriela Lopez in Monterrey; Editing by Simon Gardner and Tom Brown)
