Government privatization agency downplays financial risk to Victoria hospital project

by mike_yvr | November 20, 2008 at 08:40 am

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The head of the B.C. government agency charged with promoting privately financed public infrastructure has a rosy view of the current credit crisis facing the European banks that are putting up the capital for an expansion of Royal Jubilee Hospital.

Perhaps Partnerships BC CEO Larry Blain should read this article about the disasters and delays facing many privately financed highway, hospital, subway, waste disposal and other public infrastructure projects in the UK.

World financial markets may be crumbling, but Partnerships BC CEO Larry Blain says projects underway in the province using the public-private partnership model are in no peril—this despite large European government bailouts to the two financial firms carrying the debt for construction of the new Royal Jubilee Hospital patient tower.

The consortium of North American and European multinational firms who won the contract to design, build and operate the 500-bed project secured loans worth $206 million for the patient tower through Belgian bank Dexia and Irish-German banking conglomerate Depfa, both of which have seen their capital reserves and share prices tank on investments in bad mortgages to people with poor credit.

In late September, Dexia received a $11.3-billion loan from the Belgian, French and Dutch governments. Around the same time, Depfa required a $54-billion cash injection from its supporting governments after it “ran into short term funding problems,” according to the Irish Times newspaper.

Monday wanted to know what this meant for the Royal Jubilee project, currently in mid-construction.

“Our style here is that when the bidders respond to our request for proposals, they have to show that their financing is committed—both their own equity, and the debt from whatever source they’re going to get the debt from—and they have to show that it’s committed, available, and that its price or interest rate is committed as well, and they have to hold that commitment,” Blain told Monday.

Blain maintains that if, for some reason, Depfa or Dexia were unable to meet their funding commitments to the participating firms, the onus falls on those firms to find alternate sources of funding to complete the project.

“In any case, we don’t pay for the project until the project is completed and works according to the standards that are set according to the contract,” says Blain. “And the owner, VIHA, won’t pay anything until the project is entirely finished.”