I’ve continued to question the Minister of Finance on the fall out from the takeover of the Stanton P3 maintenance contract by Fairfax Canada. I got the briefing note below, which updates with the latest information.
I’ll continue to press for more information and post it as it’s received.
STANTON TERRITORIAL HOSPITAL RENEWAL PROJECT
PURCHASE OF CARILLION CANADA
On February 5, 2018, Fairfax Financial Holdings Limited (Fairfax) announced it had entered into an agreement with Carillion Canada where Fairfax will acquire certain assets and assume certain liabilities related to Carillion’s Canadian operations.
- Construction activities are not affected. The design and construction of Stanton is being undertaken by a joint venture of Bird Construction and Clark Builders. The proposed purchase of certain activies Carillion Canada will not impact current construction activity and timelines.
- P3 model and structure is functioning properly to protect the GNWT. Project Co is required to be a separate legal entity which isolates the GNWT from external shocks to any of Project Co’s parent companies. It is Project Co’s responsibity to remedy any adverse operational or other impacts being faced by any member of the consortium.
- Project Co partners remain committed. The other Partners of the consortium, Bird and HOCHTIEF, have confirmed their commitment to the project, which includes assessing the proposed acquisition of Carillion Canada’s services business, which includes the Stanton contract.
On February 7, 2018, the Department of Finance met with representatives of Carillion Canada, Bird and HOCHTIEF. A summary of the call is as follows:
- Fairfax has offered to purchase the services business of Carillion Canada, which will include the provision of services to Stanton Hospital
- Given that the proposed transaction is an acquisition of assets, it likely the current management team, including the key people involved in the Stanton project, will still be in place. A takeover by a competitor would install its own management and program services people into the new entity
- Proposed purchase is going through a due diligence review by Fairfax and UK receiver but parties want to close deal by the end of March 2018
- As part of the proposed purchase, Fairfax to advance $50 million in operating capital to Carillion
- BHP has also written Carillion and Fairfax to get clarity on the entity they will be dealing with. Likely too early for this. Need to remember, Fairfax is only a holding company that operates through various subsidiaries so will likely need to create another subsidiary this new company
- BHP Lenders pleased with the announcement as it gives some certainty that the current issue with Carillion, as it relates to the Stanton project, will be resolved in a timley manner
- Some info on Fairfax:
- A holding company that provides insurance and investment management services through various subsidiaries
- $10 billion in revenues
- $2 billion in net income
- $35 billion in assets
- $10 billion in equity
Department of Finance Assesment
- From the Department’s perspective, this is a very positive outcome, if it can be finalized. Based on the proposed structure, it really does bring us back to “business as usual” stance, especially if it can close as quickly as Fairfax wants
- Fairfax is buying the service operations of Carillion Canada, which includes providing services to Stanton Hospital
- The new company will likely have the same key people in place. Nothing currently has or will be changing on the ground.
- Strong parent company that has the balance sheet to guarantee the performance of the new company, which the Departyment would require
- BHP’s Lenders will likely support the proposal
- Though there is still some due diligence being undertaken, given the desire for a quick close and the injection of capital into Carillion, the proposed transaction looks achievable in the timeframe being contemplated
- Likely be a filling in the courts on February 8, 2018 to outline some of what was discussed at the meeting.
- Carillion Canada Inc. holds a 50 per cent equity interest in Boreal Health Partnership (“Project Co”). The other equity investors and partners are Bird Construction Inc. (“Bird”) and HOCHTIEF Canada (“HOCHTIEF”), each of which holds a 25 per cent equity interest.
- Project Co entered into a project agreement with the GNWT on September 22, 2015, to design, build, finance, operate and maintain the new Stanton Hospital. Under the Project Agreement Carillion Canada will operate and maintain the hospital for a 30-year period.
- The Project is currently in construction, with commissioning of the new hospital scheduled for November, 2018.