Nine B.C. projects and where they stand

Vancouver Sun: Jan 23

Has the global credit crunch wounded B.C. projects?

The province increasingly relies on private-public deals to build new infrastructure, but financiers have been hit hard by the economic meltdown.

1. Project: Golden Ears Bridge

What: 6-lane bridge and 14-kilometre road connecting Pitt Meadows/Maple Ridge and Langley/Surrey.

Cost: $808 million (budget increase)

Construction: To be complete this summer.

Key players and head office of consortium:

Bilfinger Berger of Germany

Depfa Bank of Ireland

Dexia of Belgium/France

Financial Fallout: Depfa Bank suffered serious financial distress in the credit crisis, and its parent company needed a bailout of $80 billion of credit and $50 billion of state guarantees. A second bailout is being negotiated. Dexia also ran into difficulty last year, and needed a bailout to help ride out the crisis.

2. Project: Royal Jubilee Hospital Patient Care Centre Project

What: 500 bed Patient Care Centre in Victoria

Cost: $282.5 million

Construction: Began 2008, to be done 2010.

Key players and head office:

Health Care Projects Canada Ltd. of the UK

Acciona S.A. of Spain

Lark Group of Surrey

Innisfree Ltd. of London, England

Depfa Bank of Ireland

Dexia of Belgium/France

Financial Fallout: Depfa Bank suffered serious financial distress in the credit crisis. Dexia also ran into difficulty last year, and needed a bailout to help ride out the crisis.

3. Project: Port Mann/Highway 1

What: Twin the existing bridge and upgrade Highway 1 for 37 km between Vancouver and Langley

Cost: Still under negotiation. Transportation Minister Kevin

Falcon has only said the project will be more expensive then

the $2 billion Canada Line.

Status: Financing is behind schedule and the deadline has been extended.

Construction: Has been delayed, but is to be done by 2013. Government has authorized limited preliminary construction to begin before funding is secured to avoid more delays.

Key players and head office:

Macquarie Group of Australia

Transtoll Inc of Australia

Peter Kiewit Sons Co of Nebraska

Flatiron Constructors Canada Ltd. of Colorado

Lead financers (according to Project Finance magazine):

BNP Paribas of France

Caja Madrid of Spain

Royal Bank of Scotland

Société Générale of France

Financial Fallout: Macquarie has been hit hard by the credit crunch, as have the lead financers to a lesser extent.

Financing falls through for $2.4 billion Port Mann

4. Project: South Fraser Perimeter Road

What: 40 km long, four-lane, route along the south side of the Fraser River, from Deltaport Way in Delta to 176th Street in Surrey.

Cost: $1 billion (budget increase)

Construction: Was to start in 2009 but now is not expected to begin until 2010.

Status: Three consortiums shortlisted to compete for the project

Key players and head office of each consortium:

1. Fraser Transportation Group

Iridium Concesiones de Infraestructuras, S.A. of Spain

Zachry American Infrastructure of Texas

Dragados S.A. of Spain

Financial Fallout: Zachry is a defendent in a $125 million lawsuit alleging fraud after cracks were found in a Texas high rise.

2. South River Connector

Babcock & Brown of Australia

Bilfinger Berger Project Investments of Germany

Peter Kiewit Sons Co of Nebraska

PCL Consultants Westcoast Inc of London, England

Financial Fallout: Babcock and Brown has lost 98 per cent of its market value and has temporarily halted the trading of its stock.

3. The Riverway Partnership

Cintra Concesiones de Infraestructuras de Transporte, S.A. of Spain

SNC-Lavalin Inc. of Montreal

Ferrovial Agroman, S.A. of Spain

Financial Fallout: Cintra has refinanced $292 million in debt linked to a road project.

5. Project: Sea to Sky Highway

What: Widening Highway 99 between West Vancouver and Whistler.

Cost: $600 million

Construction: To be complete in 2009.

Key players and head office:

Macquarie Group of Australia

Peter Kiewit Sons Co. of Nebraska

FINANCING:

Macquarie Essential Assets Partnership

Macquarie North America Ltd.

BC Investment Management

Royal Bank of Scotland

Societe Generale of France

Financial Fallout: Similar consortium to the Port Mann project, including troubled Macquarie Group and financers Royal Bank of Scotland and Societe Generale, who received government bailouts.

6. Project: Surrey Outpatient Hospital

What: 150,000 square foot outpatient facility located near Surrey Memorial Hospital

Cost: $239 million (estimate)

Construction: Began last year, to be done in 2011.

Key players and head office:

Bouygues Batiment International of France

HSBC Infrastructure Fund Management Ltd of London, England

DEPFA Bank of Ireland

Financial Fallout: Depfa Bank suffered serious financial distress in the credit crisis.

7. Project: Fort St. John Hospital

What: 55-bed acute care hospital and 123-bed residential seniors care facility

Cost: $268 million (estimate)

Construction: To begin 2009, finish 2011

Status: Two short-listed consortiums competing for the project:

Key players and head office of each:

1. Peace River Healthcare Solutions

Bilfinger Berger of Germany

(Replaces troubled Babcock and Brown of Australia, which may still be playing a role.)

CJP Architects of New Westminster

Honeywell Ltd. (Canada) of New Jersey

Financial Fallout: Babcock and Brown has lost 98 per cent of its market value and has temporarily halted the trading of its stock.

2. ISL Health

Innisfree Infrastructure Investment Group of London, England

Acciona S.A. of Spain

Health Care Projects (Canada) Ltd. of the United Kingdom

Investec of South Africa

Stuart Olson Constructors of Richmond

Financial fallout: Investec is embroiled in a multi-million-dollar lawsuit that alleges wrongdoing.

8. Project: Kelowna and Vernon Hospital Projects

What: New "patient care towers" at both hospitals, plus a new parkade and university training area in Kelowna.

Cost: $432.9 million

Construction: Began November 2008. Kelowna to be done by August 2012, Vernon by May 2011.

Key players and head office:

Bilfinger Berger Project Investments Inc. of Germany

John Laing Investments of the U.K.

Royal Bank of Canada

Dexia Crédit Local of France

Financial Fallout: Dexia received a bailout, plummeted on the French CAC index.

9. Project: Canada Line

What: Light rail line between downtown and the airport.

Cost: $2 billion

Construction: To be complete by this fall.

Key players and head office:

Lavalin Inc of Montreal

Serco Inc of the United Kingdom

Société Générale of France

Bank of Ireland

Nord LB of Germany

Financial Fallout: Both Societe Generale and Bank of Ireland have received bailouts.

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B.C. P3 lender burning through government loan guarantees NOWPUBLIC Feb 8

The Belgian-French bank that's supplying the financing to several public-private partnership (P3) projects in British Columbia has exhausted half of the government guarantees it received in a September bailout. Dexia is a financial partner in the Royal Jubilee, Kelowna and Vernon Jubilee hospital expansions as well as the Golden Ears Bridge.

World Credit crunch makes local P3 projects risky propositions NOWPUBLIC Jan25

PORT MANN PROJECT PROCEEDS USING DESIGN-BUILD CONTRACT

VICTORIA – The provincial government will construct the Port Mann Bridge and Highway 1 Project using a design-build, fixed-price contract after being unable to reach final agreement with Connect BC Development Group, Transportation and Infrastructure Minister Kevin Falcon announced today. The project will create about 8,000 construction jobs and remains on schedule for a 2013 completion. “The Port Mann/Highway 1 project has always been a certainty, but what was to be confirmed was the best way to finance it,” said Falcon. “We have determined that a traditionally financed arrangement is the better way to proceed at the current time.” The Province will enter into a fixed-price contract with the joint venture of Peter Kiewit Sons Co. and Flatiron Constructors Canada Limited to design and build the new, 10-lane Port Mann Bridge and Highway 1 widening at the previously agreed upon cost of $2.46 billion. The contract with Kiewit-Flatiron ensures cost overruns or construction delays are the responsibility of the contractor. All costs will be recovered by electronic tolls, which remain the same as previously indicated, approximately $3 for cars on opening day. “We said from the beginning that this was a very challenging capital market environment, and that executing the project would involve complex negotiations,” said Falcon. “We commend Macquarie Group for being able to arrange committed debt and equity for the project through unprecedented turbulence in global markets, and for assembling a first-class team of consortium partners. Unfortunately, the parties could not agree on final terms. Partnerships BC recommended not to proceed, and the Province and Connect BC have mutually agreed to end the P3 procurement process. However, as a Province, we remain committed to using P3 arrangements where they prove to be in the best interests of B.C. taxpayers.” The Province has engaged Macquarie Group to provide advisory services, including on financing and tolling operations, where Macquarie is recognized as a world leader. “Although we could not reach a final agreement with the Province we are proud of our accomplishments in putting together a world class proposal and team,” said Paul Donnelly, president and CEO of Macquarie Capital Markets Canada Ltd. “We look forward to sharing our global infrastructure advisory experience, together with our intimate knowledge of the Port Mann project, which we believe will prove invaluable to the Province.” The Port Mann/Highway 1 project consists of the construction of a new Port Mann Bridge and widening Highway 1, upgrading interchanges and improving safety and access between McGill Street in Vancouver and 216th Street in Langley, a distance of approximately 37 km.
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PORT MANN PROJECT TIMELINES

March 2008: The Transportation Investment Corporation was established to deliver the Port Mann/Highway 1 Project. The Transportation Investment Corporation is a self-sustaining Crown corporation that will enter into an agreement with the joint venture of Peter Kiewit Sons Co. and Flatiron Constructors Canada Limited to design and build the new Port Mann Bridge and Highway 1 widening project. Aug. 19, 2008: Following a request for proposals (RFP), Connect BC Development Group was selected to enter into negotiations with the provincial government for the Port Mann/Highway 1 project. The Connect BC Development Group team includes the Macquarie Group, Transtoll Inc., Peter Kiewit Sons Co. and Flatiron Constructors Canada Limited. The RFP evaluation was undertaken by an evaluation team including leading experts in highway safety, construction traffic management, highway design and construction, finance, environment, engineering and other technical areas. The RFP for procuring the project explicitly reserved the right for the Province to directly enter into design-build and other contracts with consortium members should a privately financed arrangement not be concluded. Jan. 28, 2009: An agreement-in-principle for a public-private partnership was reached with Connect BC Development Group to expand the Port Mann crossing and widen Highway 1. Feb. 4, 2009: Premier Gordon Campbell and Minister Falcon officially launched construction of the new Port Mann Bridge, a single, 10-lane span. Feb. 27, 2009: The Province and ConnectBC were unable to reach definitive agreement on final terms. The provincial government will enter into a contract with the joint venture of Peter Kiewit Sons Co. and Flatiron Constructers Canada Limited to design and build the new Port Mann Bridge and Highway 1 widening. The Kiewit-Flatiron contract value remains at $2.46 billion. The Kiewit-Flatiron contract was part of the Connect BC proposal. The works proposed by Kiewit-Flatiron have gone through a rigorous evaluation and meet all of the requirements for the Port Mann/Highway 1 Project. Macquarie Group will remain directly involved in the project, and has been engaged by the Province to provide advice, focusing on the areas of financing and tolling operations where Macquarie is recognized as a world leader.

The Port Mann/Highway 1 project will reduce congestion and travel time, improve safety and accessibility, and allow buses to travel over the Port Mann Bridge for the first time in over two decades. It will also expand networks for HOV, cyclists and pedestrians, and the bridge will be built to accommodate potential future light rapid transit.

Financing falls through for $2.4 billion Port Mann

CTV

The B.C. government has been forced to take over the entire $2.4-billion cost of the Port Mann Bridge project after plans for a partnership with a private consortium fell through. Transportation Minister Kevin Falcon says the province was unable to work out a financing deal with the Connect B.C. Development Group, which included the Australian-based Macquarie Group. Falcon blames a `challenging capital market' for the failure and says the government will use a fixed-price contract to build the 10-lane span to replace the current five-lane bridge over the Fraser River. He says the project remains on schedule for completion in 2013 and the contractors, Peter Kiewit Sons and Flatiron Constructors, will be responsible for any cost overruns.Falcon says the cost of the bridge will be recovered by electronic tolls of about $3 a car. At an announcement earlier this month, Falcon said the cost of the toll could go up each year, depending on inflation and it was estimated that the tolls could be in place for up to 40 years.

But now that the project is no longer a public-private partnership, there is speculation this might change. The Port Mann bridge project includes widening the Trans-Canada Highway from Vancouver to Langley and upgrading interchanges along the route. Highway 1 will also be expanded in the project, with an extra lane in both directions leading to the bridge.

Financing fears grow over P3 projects

By Jeff Nagel - BC Local News Published: October 07, 2008

Warning flags are going up that the global credit crisis could leave B.C.'s major infrastructure projects unable to get expected financing through private partners. Key projects such as the Port Mann Bridge/Highway 1 widening do not yet have final signed contracts with groups of global companies that are supposed to finance, design, build and even maintain new facilities. They're being built through public-private partnerships (P3s), intended to shift construction and financial risks away from the government. Although governments with their better credit ratings can raise money more cheaply than the private sector, the case for P3s has been based on the greater efficiency of private construction offsetting the higher finance costs. But some critics say that may be changing, as the differential between private financing costs and government bonds dramatically widens, and many private firms are challenged to raise money at all. "It's much more difficult to get credit," said Canadian Centre for Policy Alternatives economist Iglika Ivanova. "It will be harder for the private partners who want to bid to raise the money. Costs will increase. It could be increasing costs will be passed on to the government and the taxpayer."

Much, she said, depends on the details of the contracts the province strikes with P3 partners, but those are not made public. Government could opt to shield partners from some risks in order to lower financing costs, but that undermines the intent of P3s. Partnerships BC CEO Larry Blain said he is "pretty relaxed" about projects where planning is well underway. He said the group picked this summer to build the $1.7-billion Port Mann/Highway 1 project has pledged its financing as a condition of going into final negotiations on a contract. "Banks are committed to providing loans on certain dates," he said of the consortium led by Australian infrastructure firm Macquarie Group. "As we go through the project they put more and more of their capital in." Blain said he could not discuss the Port Mann negotiations or whether the global financial crunch has led the firms to demand more favourable terms. Nor could he reveal how big a deposit the private bidders have put up, which would be forfeit if the group were to walk away from the negotiations."They're committed and there are consequences if they did that," Blain said.

Victoria had been aiming for a final Port Mann deal this fall. Also in talks but not yet finalized are a Fort St. John hospital project, a new northern cancer centre in Prince George and a long term care facility in Prince George. Other big P3 contracts have been signed over the summer, for construction of the Surrey Outpatient Hospital, as well as hospital expansions in Victoria and Kelowna/Vernon. "All of those projects reached financial closing and are now under construction." In the event partners were unable to finish a project or did not complete it to specification, Blain said the province could withhold payments. "They don't get any financial payment until they're actually completed," he said. Blain's happy the hospital projects were signed off when they did – before the financial turmoil deepened. "We feel pretty good about the risk transfers that we're achieving," he said. "In these sorts of situations where there is movement in the markets, we're pleased."

Blain said the financial market upheaval may affect the P3 business moving forward. He expects a continuing active market for smaller projects, but said that may not be the case for large ones on the scale of the Port Mann where many firms and banks must join forces. "There's some evidence around the world those types of projects are difficult to do," he said. The South Fraser Perimeter Road is one project that is still early in the procurement process, with bidders not yet identified. The situation will stabilize at some point, Blain said, and at that time banks will be attracted to infrastructure projects that can count on B.C. taxpayers as long-term stable customers.

MLA defends P-3 plan for VJH

By Peter McIntyre 107.5 Kiss FM

Vernon's MLA says there will be a system in place to ensure a private public partnership doesn't erode health care at Vernon Jubilee Hospital. Concerns were raised this week by VJH employee Jeet Dukhia that having a large consortium in charge of the upcoming expansion, is designed for profit, and will be a disaster. MLA Tom Christensen tells KISS FM audits will ensure the standards are being met. "And what those audits have proven is facilities that are being maintained through a P-3 model are operating at the same standards as other facilities that are operating under the more traditional models." Christensen says the P-3's used in Abbotsford and Vancouver health care projects have been positive, and have provided excellent value for taxpayers dollars.

Hospital Project Website and Other info of Interest.

WEBSITE: http://www.kelownavernonhospitalsproject.ca/homepage/

The Kelowna and Vernon Hospitals Project is a partnership between the BC Ministry of Health, Interior Health, Partnerships BC, the Central Okanagan Regional Hospital District and the North Okanagan Columbia Shuswap Regional Hospital District.

KGH AND VJH EXPANSION News Release Backgrounder:

Infusion Health is a team that combines the strength, innovation and experience of B.C. based construction and architectural firms with international companies to deliver state-of-the-art health care facilities.

Members of the Infusion Health team include:

Bilfinger Berger BOT Inc.;

• John Laing Infrastructure;
• Graham Construction and Engineering Inc.;
• Stantec;
• Black & McDonald.

Healthcare under siege.

Media Release June 29, 2008

LUMBY– Healthcare under siege.

Universal Healthcare is under threat in Canada. The dangers posed by the American model of "for-profit" healthcare cannot be overstated. Under the North American Free Trade Agreement (NAFTA), allowing more for-profit healthcare in Canada will be the "thin edge of the wedge" that could rob Canadians of their National Healthcare system. We must not let that happen.

Yet it is happening as we sleep.

There is a Public-Private Partnership (P3) hospital being built in Abbotsford. The Vancouver Island Health Authority (VIHA) announced that 240 public long-term care beds will be closed and replaced with beds operated by private for-profit companies!

Here at home, Interior health is engaged in a P3 deal with Infusion Health, for the building of the new tower at Vernon Jubilee Hospital. No information about the agreement with Infusion Health has been forthcoming from either Interior Health or the Campbell Government. If, as the Hon. George Abbott states, the Province is paying 60% of the costs, and we know that the property taxpayers of North Okanagan-Shuswap are paying 40%, then the question is: How is Infusion Health profiting?

Premier Campbell has NO MANDATE to privatize the healthcare system. Privatization of Healthcare is a Federal issue. The Federal Government must use the full force of the Canada Health Act to prevent the privatization of our National Healthcare system.

Privatization has been proven to be bad for Canadians. A study done by McMaster University reported that the "Canadian government would pay an extra $7.2 billion in annual health care costs if Canada switched to investor-owned private for-profit hospitals". According to Dr. P .J. Devereaux, the lead author of the study, "With for-profit care, you end up paying with your money, and your life."

The Vernon and Districts Taxpayers' Association has sounded the wake-up call with its petition of 18,000+ signatures and their further demand for full disclosure of the role played by 'private' for-profit companies in our publicly-funded healthcare system. I fully support their position.


Huguette Allen
Okanagan Shuswap Green Party MP Candidate.

P3 deal flops in Cranbrook

By JOHN MOORHOUSETuesday, February 27, 2007 http://www.pentictonherald.ca/article_3132.php

As Penticton city council looks to finalize a private sector management deal for the South Okanagan Event Centre, the City of Cranbrook is about to end a controversial P3 agreement for its six-year-old recreation complex.But there are few similarities between the two situations, Cranbrook Mayor Ross Priest said in a telephone interview Monday.Penticton council has signed an interim agreement with Philadelphia-based Global-Spectrum and hopes to sign a final contract by June 30 for managing the event centre, Memorial Arena and the Penticton Trade and Convention Centre.By contrast, Priest said a two-year legal battle to terminate a public-private sector partnership at the Cranbrook Recreation Complex could be concluded by this Friday.

The Cranbrook facility which includes an arena, swimming pool and other amenities, opened in October 2000.Rather than retain ownership of the centre, the city entered into a long-term agreement with the developers, Keen Rose Technology Ltd., whereby the company borrowed 100 per cent of the capital costs. The city's lease payments would cover the debt payments. After 30 years, the facility ownership would revert to the city.However, Priest said the anticipated revenue flow didn't come near expectations, winding up more than $1 million a year off expectations."It was destined to fail before it ever got off the ground," said Priest, who was not on council at the time and strongly opposed the partnership agreement."The revenues that were projected were pie in the sky scenarios that didn't have much chance of success -- and are proving that had no chance of success . . . and subsequently the private contractors cut back their operation very much to the bone."

Complicating the situation was the company's assets were sold two or three times. An agreement to terminate the deal is now scheduled to close March 2."Our new partner desperately wants to get out of this agreement as well, and we are in fact getting paid about $1.7 million to relieve them of future financial obligations," he said.The city will then take over complete operation of the facility, but noted debt servicing and operation of the rec-plex will still be a challenge.However, Priest emphasized the Cranbrook experience is decidedly different from the pending Penticton agreement and he doesn't want to be seen as criticizing Penticton council's decision on private sector management for the South Okanagan Event Centre.

Priest added he has no problems with the rec complex itself, which he describes as a great facility. It is also home to the Kootenay Ice of the Western Hockey League, who average crowds of about 3,400 in the 4,600-seat arena.Mayor Jake Kimberley said Monday the city was well aware of the difficulties encountered by Cranbrook prior to opting for a private sector management of the event centre. He noted Global Spectrum is a large company and well-experienced in running such facilities.An interim agreement with Global Spectrum was formally signed earlier this month, which allows the company to start preliminary work on taking over the three facilities, subject to final approval by council.Jack Kler, the city's director of corporate services, said the interim pact can only be extended with consent from both parties. Instead of a single 25-year agreement, plans call for a series of five-year service agreements with an option to renew by mutual consent of both parties."Ours is a pure operating agreement," Kler said. "The five-year window is a technicality and a formality at the same time. We just want to be sure everybody is still moving along and all our expectations are being met."No transfer of management of the facilities will take place until a final contract is signed.