DBRS Confirms Health Montréal Collective Limited Partnership/Collectif Santé Montréal S.E.C.

DBRS has today confirmed the BBB (high) rating and Stable trend on the $1,371 million Senior Secured Bonds of Health Montréal Collective Limited Partnership/Collectif Santé Montréal S.E.C. (ProjectCo). ProjectCo is the special-purpose entity created to design, build, finance and maintain a new 772-bed healthcare facility (the Project) under a 38.8-year public-private partnership (PPP) with the Centre Hospitalier de l’Université de Montréal (CHUM or the Hospital) as evidenced by the Project Agreement.

Virtually all of ProjectCo’s construction-related obligations under the PA have been passed down to the Construction Contractor (a joint venture of Laing O’Rourke Canada Ltd. and OHL Construction Canada Ltd.). The Construction Contractor was able to take advantage of favourable conditions during the winter months, and rock excavation work for Building D (the new main hospital building) was completed slightly ahead of schedule. All work in proximity to the subway has been completed, while foundation work for Building D has commenced and bulk excavation for Block B1 is also underway. Some tasks not on the critical path are delayed, such as some of the Early Works and the integration of the temporary energy centre, although the Technical Advisor (TA—BTY Group) is of the opinion that the Project remains overall on schedule and based on its latest report, the Project is on the draw curve with 13% of the construction budget expended. As of the time of this report, 85 subcontracts have been let, mostly pertaining to enabling works, structure and excavation.

Two Variation Directives have been received from the Hospital, one to increase the central sterilization to meet 100% of CHUM’s needs and one to construct an enclosed elevated walkway between Block A1 and Blocks B/D. These have caused some major revisions to the construction schedule, although the TA has opined that the new schedule is feasible and the changes have been accepted by the Trustee. The Construction Contractor has also been able provide some additional flexibility to the construction schedule by de-linking the construction of Block A1 from the critical path through the incorporation of the temporary energy centre, which leaves only Block D on the critical path.

Upon completion of Phase 1 construction, the 33.9-year service phase will commence, entailing routine and lifecycle maintenance of the facility and electromechanical equipment, as well as management of energy consumption. Ancillary functions, such as help desk services, grounds maintenance, waste management, pest control and security, are also within the scope of the Project. With the exception of general management and certain insurance responsibilities, ProjectCo’s obligations related to the service phase will be passed down to Dalkia Health Services Montréal L.P. (the Service Provider). The financial projections for the service phase remain consistent with the original financial model and adequate for the rating.

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

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is Rating Canadian Public-Private Partnerships (December 2011), which can be found on our website under Methodologies.