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Quito Airport project reaches financial close

Jun 29, 2006

Toronto, Ontario – June 29, 2006: Aecon Group Inc. (TSX: ARE) today announced that Aecon and its partners have achieved financial close of the Quito International Airport project, and that project lenders have advanced the first tranche of financing.

Achieving financial close allows construction of the new US$414 million airport to begin. Aecon will build the airport as part of a 50/50 joint venture with Andrade Gutierrez Constructores, one of the largest construction companies in Brazil.

In addition, Aecon currently has a 45.5% economic interest in the airport concession through its stake in Corporaciσn Quiport S.A. (Quiport), which holds concession rights for the airport.

Total cost of the project is approximately US$591 million, which will be provided through equity contributions from Aecon and its partners (about US$74 million), debt raised from the project lenders (about US$376 million) and operating profits generated from the existing Quito airport from the effective date of the concession in January of 2006 through the end of the construction period (about US$141 million). Aecon's equity investment of approximately US$33 million will be made between 2006 and 2009.

Aecon's partners in Quiport are: Andrade Gutierrez Concessoes of Brazil, Airport Development Corporation of Toronto and HAS Development Corporation of Houston, Texas, affiliated with the Houston Airport System. The grantor of the concession is Corporacion Aeropuerto y Zona Franca del Distrito Metropolitano de Quito (CORPAQ), and the project's senior lenders are: USA-based Overseas Private Investment Corporation, Export-Import Bank of the USA and the Inter-American Development Bank as well as Export Development Canada (EDC).

"This closing represents an important milestone for Aecon. In addition to the expected construction profits, our role as a developer provides significant additional earnings potential for Aecon," said John M. Beck, Chairman and CEO, Aecon Group Inc. "Our long history of building airports in Canada and internationally, together with our experience developing major infrastructure projects, positions us well for this project which we believe will contribute substantial value to Aecon."

“We are very excited by the potential of this project,” said Steve Nackan, President, Aecon Concessions. “Our experience managing the existing airport since 2002 has demonstrated the strong value potential of this airport, and reaching financial close on construction of the new facility can only strengthen our future outlook.”

“As one might expect of a new airport being built on a mountain plateau, this project presents a unique construction challenge,” said Doug Steels, President, Aecon Constructors. “But we've been preparing for this for some time and we're ready to go.”

The new airport is to be constructed 18 km east of Quito near the village of Tababela. Infrastructure for the site, including a 20km water line, must be built before construction of the facility itself can begin. About seven million cubic metres of earth will be moved during the grading process.

"Today is the result of years of hard work by a lot of dedicated people, but none more than Mayor Paco Moncayo of Quito, whose vision and perseverance has made this project a reality," said Bill Pearson, Executive Vice President, Aecon Group Inc. "This milestone would also not have been possible without the assistance of the Canadian Government who - through the Canadian Commercial Corporation, Export Development Canada and the Canadian International Development Agency - did so much to make it happen.”

In 2002, Quiport was awarded a concession by the City of Quito, Ecuador to design, build, finance and operate a new airport to replace the existing smaller airport currently serving the city.

Demand for airport services in Quito - Ecuador's capital city - has been growing steadily over the years, and the existing downtown airport does not have adequate capacity or the expansion capability necessary to accommodate the current traffic of over three million passengers per year.

The existing airport is severely limited in a number of areas including passenger terminal capacity, runway length, ancillary facilities such as car parking and aircraft servicing facilities.

The new airport will be constructed under a 51-month fixed-price engineer/ procure/ construct contract signed between the City of Quito and the Canadian Commercial Corporation (CCC), a Crown agency of the Canadian government. CCC, in turn, will subcontract 100% of the construction work to a 50/50 joint venture consisting of Aecon and Andrade Gutierrez Constructores. Aecon will act as Managing Partner of the construction joint venture.

Quiport has been operating the existing Quito airport since November 2002 and will continue to operate it until the new airport is complete, when it will shut down operations at the existing airport and commence operations at the new one. As such, Quiport is already familiar with the asset, its operating challenges and its traffic patterns.

Last summer, along with its partners, Aecon signed the key financing documents for the project, and in January of this year the concession took full effect.

Through the 35-year concession contract, Quiport has the right to collect all revenues from airlines, passengers and retail concessions at the Airport until 2040. Some of these revenues, most notably aircraft landing and passenger departure fees, are regulated by contract - others, including commercial revenues such as duty free and other ancillary enterprises, are not. All revenue and costs on the project will be in US dollars, which is the only legal currency of Ecuador.

In addition to its approximately US$33 million equity investment, Aecon is guaranteeing approximately US$30 million of contingent equity.

Similar to its previous investment in the Cross Israel Highway, Aecon will use its expected cash profits from construction-related activities toward financing Aecon's equity investment in the Quito Airport concession.

Aecon will be accounting for this investment using the proportionate consolidation method, which is in accordance with generally accepted accounting principles.

Under Aecon's accounting policy for large multi-year contracts, profit is recognized only when construction progress reaches a stage of completion sufficient to reasonably determine the probable results (generally when the contract is 20% complete), which is expected to occur on the Quito project late in 2007.

Quiport is expected to generate positive accounting income for Aecon in its first year of operation following the 51-month construction period, while from a cash perspective, it is expected that Quiport will be in a position to pay dividends beginning approximately two years later.

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 internationally.