9/7/11

Does Canadian business have the financial jelly to win P3 deals?

Even more concern about P3s (public private partnerships) in Britain has emerged.  This time that they might disadvantage English based manufacturing.  


Bombardier lost its position as the favorite for a £1 billion Crossrail train contract when the government moved to fund the deal through a P3, the Guardian reports.  


The problem?  Bombardier's German based competitor, Siemens,  has better access to financing than Bombardier.  "A large company like Siemens will be able to borrow the money to undertake a project of this kind," Tony Travers, director of the Greater London Group at the London School of Economics, warned. 


Indeed, Siemens's superior financial firepower is thought to have been a factor in their victory over Bombardier for a recent Thameslink deal that caused Bombardier to announce it would layoff 1,400 workers at a British factory.  


This dynamic is likely even more relevant to Canada than England. Our local business class is not among the big boys (even compared to British business who have, in fact, pushed into the Ontario hospital industry through P3s).  Indeed, Bombardier (the little boy loser in the English deal) is actually a Canadian based corporation -- one of our biggest.  


So are Canadian corporations likely to have the "superior financial power" that will advantage them in the long term financing deals inherent to P3 privatization?  Their size, at least, suggests otherwise.  


The problem is particularly acute given that the world's financial troubles has made the cost of private financing even more expensive compared to public financing.  


Nevertheless this Zombie staggers on: the Ontario government is launching a major P3 hospital program, just as the English did.


Update October 2011: As it turns out, the Bombardier CEO actually publicly questioned P3s earlier.  Here's a report from May 2010: 



The president and CEO of transportation giant Bombardier has publicly questioned the value of public-private partnerships (P3s).  
 Speaking at a conference in California, Pierre Beaudoin said corporations aren’t always the best choice to finance transit infrastructure projects.
He pointed to the difference in public and private borrowing rates, and highlighted the ongoing impact of the financial crisis on private financing. 
Beaudoin’s caution is rooted in reality. In 2007, Bombardier lost $164 million in the collapse of a P3 to maintain and expand the London subway system.

The privatized tube project has been labeled a “spectacular failure" and “an ill-conceived disaster.”

London taxpayers are now facing service cuts and upgrade delays to pay for the privatization fiasco.

http://cupe.ca/images/pdficon.gif Translated media coverage of Beaudoin's remarks



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