US$210 million extension of the Cross Israel Highway reaches closing

    - Aecon monetizes $10 million of its investment as part of the deal -

    TORONTO, June 26 /CNW/ - Aecon Group Inc. (TSX: ARE) today announced that
Derech Eretz Highways Ltd. (DEC), the company owning concession rights for the
Cross Israel Highway, has achieved financial close on an 18km northern
extension of the highway.
    Aecon, which owns 25% of DEC, had previously disclosed that an agreement
was reached between DEC and the State of Israel granting it concession rights
for the extension, known as Section 18, subject to a number of conditions,
including financial close. Under the agreement, which is structured as an
addendum to the original concession contract signed in 1998, DEC is
responsible for the financing, construction and operation of Section 18.
    Total project cost, including development, financing and construction
costs, is approximately US$210 million. Section 18 is being project financed
with approximately US$142 million in senior debt, a grant of US$9 million from
the Israeli government, and US$56 million in mezzanine financing provided by
Israeli banks and financial institutions. In addition to the grant, the
government will turn over to the concession some previously completed
engineering and construction work.
    Under the deal, DEC is authorized to repay approximately US$40 million of
the subordinated debt invested by the DEC partners at financial close of the
original project in 1999. The repayment of this subordinated debt was subject
to government and lender approval. As a 25% partner in DEC, Aecon will receive
approximately US$10 million of the debt repayment.
    Construction, which is expected to cost approximately US$160 million, is
scheduled to take about 30 months to complete. The construction work for
Section 18 was awarded by DEC to the construction joint venture that built the
main section of the highway, in which Aecon holds a 25% share. However, Aecon
also announced today that it has sold its right to participate in the joint
venture building this extension to its DEC partners for approximately
US$3.5 million.
    "This is a positive and important deal for Aecon on a number of levels,"
said John M. Beck, Chairman and CEO of Aecon Group Inc. "In addition to being
the first significant monetization of our investment in the highway, it also
enhances the value of our equity in the project by strengthening the overall
concession, and allows us to effectively realize construction profits in
advance of the extension being built and without the risk normally associated
with a project of this kind."
    Under applicable accounting rules, the approximately US$10 million
repayment will be accounted for as a return of capital. As such, the carrying
value of Aecon's investment in the concession will be reduced by the full
amount of the repayment, with no impact on earnings. The sale of Aecon's
participation in the construction joint venture will be accounted for as the
sale of a right, thus contributing approximately US$3.5 million in pre-tax
    The deal was signed Sunday in a ceremony attended by the Israeli Minister
of Transport Mr. Shaul Mofaz as well as representatives of Aecon and its
Israeli partners, Africa Israel Investment Ltd. and Housing & Construction
Holding Co..
    The Cross Israel Highway, which has now been fully opened and tolled for
over three years, continues to meet the traffic projections set by the
concessionaire. Average week day traffic on the highway in March 2007 reached
86,000, a 17.9% increase over March 2006. The new extension is expected to
contribute significantly to traffic volumes on the main section of the
    As was the case in the original Cross Israel Highway concession contract,
this deal also requires some limited security and performance guarantees from
the DEC partners.

    Aecon Group Inc. is Canada's largest publicly traded construction and
infrastructure development company. Aecon and its subsidiaries provide
services to private and public sector clients throughout Canada and

    The information in this news release includes certain forward-looking
statements. These statements are based upon assumptions that are subject to
significant risks and uncertainties. Risk factors are discussed in greater
detail in the Section entitled "Risk Factors and Uncertainties" in
Management's Discussion and Analysis of operating results and Financial
condition for the year ended December 31, 2006, filed on SEDAR at Although Aecon believes that the expectations reflected in
forward-looking statements are reasonable, it can give no assurance that the
expectations of any forward-looking statements will prove to be correct.

    %SEDAR: 00004778EF

For further information:

For further information: Mitch Patten, Vice President, Corporate
Affairs, Aecon Group Inc., (416) 297-2615,,

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