Skip to main content

P3 bank crisis: Are we really transferring risk to the banks?

Canadian banks have usually preferred to limit their P3 (public private partnership) involvement to [a]  financial advice, and [b] financing over the construction period for the public facility being built (i.e. two to three years of financing rather than the twenty to fifty years of P3 financing required after construction).

European banks (whose problems you may have been reading about lately) however have been a major player in the long term financing of P3 deals in Canada. 

The 2008-9 financial crisis raised more questions over the claim by the banks and the rest of the P3 industry that the extra costs associated with P3s (compared to normal infrastructure procurement) was offset by a “risk transfer” to the private sector.   (To offset the large financing cost advantage of normal government infrastructure development, P3 supporters have to claim that considerable risk is transferred to the private sector  -- and that the public should pay a LOT of money for the risk transferred to the private sector.)

Project Finance Magazine reports that the "Niagara hospital project in 2009 demonstrated that the province was not immune to financing difficulties. When Plenary's (the p3 corporation's) institutional relationship with Deutsche Bank came under strain and it was reassessing its debt solutions, the province stepped in and offered an increased contribution to the project in the form of extra milestone payments, which might be charitably described as a soft loan, assuming the province can get the payments back in a refinancing".

Blakes (the corporate law firm) adds that as "the most recent financial crisis continued through 2009, the various Canadian P3 agencies introduced some form of milestone payments during or at the end of the construction period to reduce the level of long-term debt financing required. Although the financial markets have been more stable, we continue to see milestone payments utilized in most Canadian P3 transactions."

The $125 billion bailout of the Spanish banks announced this week raises more questions, once again.  Are these banks reliable partners? Is the public actually transferring risk to them?  (Or are they transferring risk to us?)  Is the high cost to the public for the alleged risk transfer to these organizations justified?  What will the bank instability do to the cost of P3 financing?  


Popular posts from this blog

Health care funding falls, again

Real provincial government health care funding per-person has fallen again this year in Ontario, the third year in a row.  Since 2009 real funding per-person has fallen 2.6% -- $63 per person. 

Across Canada real per person funding is in its fourth consecutive year of increase. Since 2009, real provincial funding across Canada is up $89 -- 3.6%.
In fact the funding gap between Ontario and Canada as a whole has gown consistently for years (as set out below in current dollars).

Ontario funds health care less than any other province -- indeed, the province that funds health care the second least (B.C.) provides $185 more per person per year, 4.7% more.  
Provincial health care spending in the rest of Canada (excluding Ontario) is now  $574 higher per person annually than in Ontario. 

 Ontario has not always provided lower than average health care funding increases-- but that has been the general pattern since 2005.
Private expenditures on health care have exceeded Ontario government increases …

Ontario long-term care staffing falls far short of other provinces

CUPE and others are campaigning for a legislated minimum average of four worked hours of nursing and personal care per resident per day in long-term care (LTC) facilities.  New research indicates that not only is LTC underfunded in Ontario, it is also understaffed compared to the other provinces. 
LTC staffing falls short:  The latest data published by the Canadian Institute for Health Information (and based on a mandatory survey undertaken by Statistics Canada) indicates that staffing at long-term care (LTC) facilities falls far short of other provinces. 
Part of this is driven by a low level of provincial funding for LTC.

Ontario has 0.575 health care full-time equivalent employees (FTEs) per bed staffed and in operation.[1]  The rest of Canada reports 0.665 health care FTEs.[2] The rest of Canada has 15.7% more health care staff per bed staffed and in operation than Ontario.[3] 

No other province reports fewer LTC health care staff per resident (or per bed) than Ontario.[4]

Occupancy r…

Six more problems with Public Private Partnerships (P3s)

The Auditor General (AG) has again identified issues in her annual reportwhich reflect problems with Ontario health care capacity and privatization.   First, here are six key problems with the maintenance of the 16 privatized P3 ("public private partnership") hospitals in Ontario:
There are long-term ongoing disputes with privatized P3 contractors over the P3 agreements, including about what is covered by the P3  (or “AFP” as the government likes to call them) contract.The hospitals are required to pay higher than reasonable rates tothe P3 contractor for  maintenance work the contractor has deemed to be outside of the P3 contract. Hospitals are almost forced to use P3 contractors to do maintenance work the contractors deem outside of the P3 contract or face the prospect of transferring the risk associated with maintaining the related hospital assets from the private-sector company back to the hospitalP3 companies with poor perf…