DBRS Confirms Plenary Properties LTAP LP at “A”, Stable

DBRS has today confirmed its ratings of “A”, with Stable trends, of the Short-Term Senior Bonds and Long-Term Senior Bonds of Plenary Properties LTAP LP (ProjectCo), the special-purpose entity created to design, build, finance, maintain and provide information technology (IT) and lifecycle services to the Communications Security Establishment Canada (CSEC) Long-Term Accommodation Project (LTAP). The project is governed by a 33.5-year Project Agreement (PA) signed between ProjectCo and the Government of Canada (the Crown), as represented by Defence Construction Canada (1951) Ltd. The new facility, referred to as the LTAP facility, will substantially consolidate all services currently provided at several separate locations by CSEC, Canada’s foreign intelligence and national cryptologic agency.

Construction work has progressed smoothly and remains on schedule to reach the July 31, 2014, target substantial completion date. All required design milestones have been achieved in a timely manner, with the base design packages nearly completed and additional packages to address security, audio/visual and tenant planning under advanced development. Concrete structures are finished and all tower cranes have been demobilized. The construction is now focused on completing the LTAP building envelope by the end of December 2012, as well as completing the mechanical and electrical rough-in and equipment connection works for the Data Centre and the LTAP building, along with continuing the interior fit-out.

Major contractual project milestones achieved in 2012 included: (a) 100% LTAP core and shell design drawings, (b) Data Centre water-tight and (c) the completion of the LTAP concrete structures. The DB Contractor anticipates achieving the next milestone, the start of the Data Centre IT system, in January 2013, four months ahead of schedule.

ProjectCo has established a generally good and responsive working relationship with the Crown and CSEC and has not raised major concerns around the staff security requirements. Subcontractors have maintained a satisfactory level of productivity and no interface issues were identified. The payments made by ProjectCo to the DB Contractor are running on schedule with the bond withdrawal curve. All approved variations, which are modest in cost and low in risk, have been separately funded by the Crown and will be absorbed into the current construction schedule.

Honeywell has begun delivering the partial facility management (FM) services in association with the adjacent Mid-Term Accommodation Project (MTAP), after the facility was turned over to ProjectCo in November 2011. The partial FM services will continue until the full integration with the completed LTAP facility.

No major concerns, complaints or deductions have been identified by the technical advisor (TA), BTY Group, regarding the construction of the overall project or the operations of the MTAP facility. As of the date of the latest TA report, approximately $589 million or 70% of the design and construction work has been completed, as measured by fees payable to the design-build contractor, PCL Constructors Canada Inc. (DB Contractor), a subsidiary of PCL Construction Group Inc. (PCL).

The 30-year operating phase will formally begin upon substantial completion of the LTAP facility. Key service responsibilities include customary routine and lifecycle maintenance as well as fairly comprehensive IT and security services. Ancillary services, such as help desk, energy consumption management and food services, are also part of the scope of services. The extensive benchmarking process under the PA shall periodically update the service prices over the 30-year operating phase and partially mitigate re-pricing risks in case the service provider needs to be replaced. Financial projections for the service phase remain consistent with the financial model and adequate for the rating.

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

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