A spokesman for the Rio 2016 Olympics told Reuters on Monday the temporary power supplier Aggreko (AGGK.L) has backed out of a pending agreement to supply generators for the city during the 2016 Olympic Games.
With the major sporting event just months away, organizers are scrambling to find a new electricity provider for the games. The contract was vital, particularly for the electricity needed for international broadcasters, the opening and closing ceremonies, and as a general backup for the different Olympic venues.
Last week, according to Digital Journal, Rio organizers met with the IOC’s executive board, telling the IOC that a 30 percent funding cut was necessary due to economic conditions in the country, but assuring the committee the cuts would be “behind-the-scenes.” At that time, the IOC was informed that organizers had not formally signed a contract with the temporary power provider.
But the Olympics is overshadowed by Brazil’s economic crisis as the country is embroiled in the worst recession it has dealt with in over 25 years. On top of this, the government has told organizers they have no more money to hand out in the event of cost overruns.
While Rio organizers told the IOC last week that construction of venues and infrastructure is on track to be finished in time for the games, they recently admitted that budget constraints will make it difficult to deliver those promises. Now that Aggreko, the most experienced bidder has pulled out of the tender process, financial experts are saying not getting the contract for the Olympics will affect Aggreko’s 2016 earnings.
But Rio 2016 spokesman Mario Andrada told Reuters he was comfortable with the contractors still left in the bidding process, and the winner would be passed on to the board for approval on Tuesday. Two different sources told Reuters the companies left in the bidding didn’t really have the experience to handle the 2016 event and would probably need to rent generators from Aggreko anyway.
Aggreko is not forthcoming with their reasons behind pulling out of the bidding, but insiders suggest it could be due to the over two years of negotiations on the contract with organizers, as well as the constant changes in the scope of the power needed. Then there was the big question of who was going to pay, the government or the Olympic organizers. It looks like things are getting tight, and time is getting short.
