Petrowest Corporation (TSX:PRW), one of three major contractors involved in the building of the $8.8-billion Site C dam project, announced August 13 its lenders are seeking immediate repayment of all owed debts on the company's credit facilities, and that its board of directors have agreed to resign when a receiver is appointed.
The company's lenders will be filing an application to put the company into receivership in Alberta court, which is expected to be heard and approved Tuesday, the company said. Ernst & Young is expected to be appointed receiver and will manage the day-to-day affairs of the company.
Company shares could be halted from trading on the Toronto Stock Exchange, which were listed at nine cents on Monday, the company added.
The company did not identify how much is owed to lenders in its announcement, and company officials have not returned calls for comment.
- Alaska Highway News
Notice of termination
Petrowest has received a notice of termination from one of its partners in the main civil works contract at the high-profile Site C dam project, company officials said.
The notice, from ACCIONA Infrastructure Canada Inc., alleges that Petrowest failed to pay its proportionate share of the working capital contributions to the Peace River Hydro Partners (PRHP). Those funds cover the costs of the PRHP project’s day-to-day operations on its Site C-related work.
PRHP, a partnered group to BC Hydro, holds the $1.7 billion contract to complete the majority of earthworks required to build Site C, including 32 million cubic metres of excavation and the building of an earth-fill dam. The PRHP partnership is made up of Petrowest, ACCIONA and Samsung C&T Canada Ltd.
ACCIONA alleges that Petrowest defaulted on its contributions to PRHP's working capital fund when Petrowest failed to pay its proportional share of the working capital contributions, valued at $15 million. Petrowest says it has contributed $2.5 million of working capital and was in discussions with PRHP about the remaining balance of $12.5 million.
According to today’s announcement, ACCIONA also alleges each of the following constitutes insolvency:
•Petrowest’s intention to sell a significant part of its assets as disclosed in its interim consolidated financial statements for the three months ended March 31, 2017; and
•The company is unable to pay the accounts of its creditors as they become due as evidenced by the going concern note in the financial statements.
David Austin, associate counsel at Clark Wilson LLP, said it’s too early to tell what kind of impact the termination notice will have on the overall Site C project going forward.
“The question is: why is Petrowest unable to meet its financial obligations to the consortium? $12.5 million on a $1.7 billion contract is not a lot of money,” Austin said in an e-mail response. “Is it indicative of a larger problem with this contract, or a disagreement amongst consortium members?”
Petrowest says it is evaluating the basis for the alleged events of insolvency and default and will soon be providing a response to ACCIONA.