Equans is set to take a near £5m hit from the liquidation of the private finance initiative (PFI) company that previously had responsibility for schools in Stoke-on-Trent.
Transform Schools (Stoke) Ltd (TSSL), a PFI vehicle that built and maintained the city’s schools under a 25-year contract with City of Stoke-on-Trent Council, announced in November that it would appoint liquidators.
Equans was the primary maintenance contractor working for TSSL in recent years.
The PFI contract came to an end in October with millions of pounds of maintenance work across 88 schools incomplete, according to the local authority.
A statement from the council at the time said it was drawing up deals with “the main contractor” to continue outstanding work.
Financial terms of a deal have not been disclosed, though the council said it had created a £3.5m fund to pay for work after the contract expired.
TSSL, ultimately owned by equity investment firm Innisfree. appointed liquidators from Begbies Traynor on 11 December.
A document published the next day showed Bouygues UK-owned Equans was owed just over £4.9m by TSSL when it filed for insolvency.
Fourteen creditors are owed £11m in total, with three SME subcontractors owed £350,000, £330,000 and £130,000 respectively.
Some £4.7m of the money is owed to TSSL’s immediate parent entity Transform Schools (Stoke) Holdings Ltd.
No trade creditors are expected to receive any money back through the liquidation process.
An unpaid VAT bill of £200,000 is expected to be paid back in full.
Used widely in the late 1990s and early 2000s, PFI schemes were designed to be low-risk building contracts with no upfront payments for the public sector.
Special purpose vehicles that entered into them were guaranteed long-term returns, with public sector bodies paying back the cost of construction plus interest and service charges for facilities management.
The first model was scrapped by the coalition government in 2012 following criticism that it lacked transparency, was bad value for money and that contract terms were weighted in favour of the private sector.
A successor, PFI2, was introduced but subsequently abolished in 2018.
In recent months, the likes of the Confederation of British Industry, the NHS Confederation and the Association of Infrastructure Investors in Public Private Partnerships – which represents PFI investors – have called for the model to be reintroduced.
The government confirmed it would use forms of public-private partnerships to deliver 250 Neighbourhood Health Centres across England and the Lower Thames Crossing project in November’s Budget, although exact details of the models to be used are not yet confirmed.
Last year, Construction News highlighted how the number of disputes involving ongoing long-term PFI contracts had risen in recent years.
These include Lendlease and Equans being pursued by a special purpose vehicle over alleged defects at five schools in Burnley, Lancashire, built from 2007. The dispute is ongoing.
Equans, Stoke Council and Innisfree have been approached for comment.
Read More
Ian Weinfass