DBRS Confirms Plenary Health Hamilton LP at “A,” Stable Trends

DBRS has today confirmed the ratings of “A” with a Stable trend assigned to the $255 million Long Term Senior Bonds and the $115 million Short Term Senior Bonds of Plenary Health Hamilton LP (ProjectCo). ProjectCo is the special-purpose entity created to design, build, finance and maintain a new 305-bed mental health facility (the Project) under a 33-year public-private partnership (PPP) with St. Joseph’s Healthcare Hamilton. The rating confirmation is based on the progress of construction, which is tracking on schedule, and the good working relationship existing between ProjectCo and the Hospital.

All of ProjectCo’s construction-related obligations have been passed down to PCL Constructors Canada Inc. (the Construction Contractor). As is fairly typical, the Construction Contractor plans to subcontract roughly 85% of the construction task, retaining responsibilities for project management, maintaining insurance, and commissioning of the facility. Subcontracts have been executed for most of the work that the Construction Contractor does not intend to perform, with only 13% of contract value remaining to be tendered, mostly consisting of some interior finishing tasks and landscaping.

Design activities are about 85% complete, and the 100% construction drawings are due to be completed in mid-December. Some items, such as interior design, will continue into 2012. Construction began in January 2011 and is now approximately 25% complete. The wet spring set back construction activities by approximately two weeks, although at the time of this report, the Project is back on schedule. Construction has proceeded without any material difficulties as of late and the Construction Contractor anticipates that work will be completed by the scheduled substantial completion date. Demolition of B-wing of the old hospital has been completed and site clearance, bulk excavation and caisson drilling have been finished. The pouring of concrete slabs is ongoing and concrete work on the west side of the Project is essentially complete, the structure having been erected to its full height of three stories at/above grade in this area.

Upon completion of the three-year construction phase, the 30-year service phase will commence. The service phase entails routine maintenance of the facility and electromechanical equipment, as well as management of energy consumption and lifecycle maintenance in order to return the facility to the Hospital upon expiry of the Project Agreement in a state of good repair. Except for general management and insurance responsibilities, all of ProjectCo’s obligations related to the service phase have been subcontracted to Honeywell Limited (the Service Provider), which has considerable experience with clinical PPP projects and lifecycle maintenance. The financial projections for the service phase remain consistent with the original financial model and adequate for the rating.

Note:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Canadian Public-Private Partnerships, which can be found on our website under Methodologies.