Joint venture-partners to carry financial slack as Carillion’s bankruptcy looms

Image from the Carrillion Canada Facebook posting announcing that operations are continuing uninterrupted.

Canadian joint-venture partners could take up the financial slack of major construction projects as Carillion PLC enters into bankruptcy.

The construction firm is among the U.K.’s largest with an estimated 50,000 employees worldwide, including 6,000 in Canada.

Despite this strong standing, it filed for liquidation on Jan. 15 following years of struggle with a $2.6-billion debt and pension deficit caused by four contracts that went sour.

Because of Carillion’s financial situation, the status of its construction projects in the country were brought into question.

These projects include road building in Alberta and Ontario, as well as construction of hospitals and mental health facilities in Ontario, Saskatchewan, the Northwest Territories, and Nunavut.

The firm has also been awarded major long-term contracts for highway and medical facility maintenance across the country.

Graham Construction, one of Carillion’s joint-venture partners, is planning to increase its stake in the construction and maintenance of a psychiatric facility in North Battleford. The project is already expected for completion in summer 2018.

“We’ll all just step up and fill the gap,” said Graham’s president and chief executive <Grant Beck. “There was a little bit of anxiety and disruption in the initial stages, but really nothing that would affect the project in the long term.”</span>

Following the liquidation, Graham shouldered Carillion’s 50 percent of the $407-million contract, which includes 20 percent of construction costs and 80 percent of maintenance costs over the period of 30 years.

More joint-venture partners are expected to increase their equity stakes in other projects. However,  analysts have assured the number of contracts in question is just relatively small and the firm could easily be replaced by other contractors.

In a statement, the company said Carillion’s Canadian operations are not in liquidation and continue uninterrupted.

“Our employees, subcontractors and suppliers in Canada continue to be paid and we remain committed to delivering safe, quality services for our clients,” the statement said. “Our Canadian leadership is currently assessing the situation and working with stakeholders to ensure continuity of operations.”


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