Greenland’s airport upgrade project braces for major cost overruns

Cost to upgrade airports in Nuuk and Ilulissat may end up a third higher than the “rough estimate” presented to lawmakers in 2018.

Legislators responsible for oversight of Greenland’s largest-ever infrastructure project have expressed their concern about potential cost overruns that may amount to a third of its 3 million kroner ($500 million) budget.

“The amount of financing now necessary suggests that the final establishment costs will significantly exceed the estimate that was submitted to Inatsisartut during deliberations over whether to approve construction,” Justus Hansen, the chair of the national assembly’s infrastructure committee, said. “At the same time, it is extremely unfortunate that the final cost is not yet known.”

Hansen’s comments came after Kalaallit Airports International, the nationally controlled firm responsible for upgrading and running what will become Greenland’s two international gateways, informed his committee on Tuesday that it had taken steps to obtain a reported 900 million kroner in the form loans and loan guarantees in the event the project goes over budget.

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Hansen placed blame for the higher cost at the feet of Kim Kielsen, the outgoing premier. He called for more accurate cost projections as construction proceeded and when new projects were proposed.

However, when it approved the upgrades, Inatsisartut gave Kalaallit Airports International permission to borrow more money “in the event construction costs are higher than expected” or if it needed short-term access to capital.

“The original estimates for what the two airports would cost to build and stand-up were only rough estimates,” Jens Lauridsen, Kalaallit Airports International’s managing director, told the news outlet Sermitsiaq.AG. “Now we are further along in the process and have a much clearer picture, and it’s become apparent that things like regulations are going to make the project more expensive.”

Inatsisartut approved runway extensions and terminal improvements in 2018 as the first phase of a long-term effort to revamp Greenland’s network of airports and helipads. Many of the airports were built to serve the U.S. military during World War II and are no longer adequate to meet domestic transport needs or its ambitions of attracting more visitors from abroad.

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By extending the runways in Nuuk and Ilulissat, lawmakers hope to stimulate the country’s tourism industry by making it possible to fly to the two destinations directly from other countries. Currently, the vast majority of people traveling to and from Greenland must transfer in Kangerlussuaq.

Half of the original budget for work at the two airports comes from Naalakkersuisut, Greenland’s self-rule authority. The rest will come from Denmark, the Danish central bank and the Nordic Investment Bank, in a deal struck with Greenlandic lawmakers as part of an ongoing Western effort to prevent Chinese investment in Greenlandic infrastructure.

News that the two airports will likely cost more than expected comes after Kalaallit Airports International in September was forced to push back construction of a new runway in Qaqortoq, the seat of government in southern Greenland, after all five bids it received in a public tender “significantly exceed” the projected cost. The project was subsequently put out to tender without any changes being made to the specifications for the runway.