Chinese investors stand to profit from the Site C dam project, thanks to a takeover of a Canadian company that leads a consortium tapped by BC Hydro as the preferred bidder on the dam’s spillway and generating station contract.
With a 30% share, Aecon Group Inc. (TSX:ARE) leads the consortium that BC Hydro announced on December 21 would be the preferred bidder for the spillway and generating station contract, which is expected to be worth at least $1.2 billion.
Other partners in the consortium include Dragados Canada, Inc. (27.5%), Flatiron Constructors Canada Ltd. (27.5%), and EBC Inc. (15%), according to an Aecon news release.
One day after BC Hydro announced that the Aecon-Flatiron-Dragados-EBC Partnership (AFDE) had been named as the preferred contractor, the Ontario Superior Court of Justice approved a $1.5 billion takeover of Aecon by CCCC International Holding Ltd.
CCCC is the overseas financing arm of China Communications Construction Co. Ltd., a state-owned, publicly traded construction company headquartered in Beijing.
Aecon’s shareholders approved a plan of arrangement that will see CCCC International acquire all of Aecon’s shares at $20.37 per share, with 99.4% of Aecon’s shareholders approving the takeover. The friendly takeover is still subject to a review under the Investment Canada Act.
Aecon has experience working on hydro-electric dams in B.C. In 2014, it was one of the partners that won the contract to modernize the John Hart hydro-electric dam in Campbell River in 2014.
Following a review by the BC Utilities Commission (BCUC), which determined the Site C dam is not likely to be completed on time or on budget, the NDP government decided to complete the project nonetheless. Cancelling it would have meant covering $4 billion in sunk costs, termination fees and site remediation, with nothing to show for it.
The project’s new estimated cost is now $10.7 billion – more than $2 billion over the last budget of $8.3 billion.
The largest contract was for the main civil works, which is still underway. That contract was awarded to a consortium called Peace River Hydro Partners for $1.7 billion.
One of the partners, Petrowest Corp., is now in receivership, after lenders called in their loans, and was terminated from the partnership.
The second largest contract for Site C is for the spillway and generating station. BC Hydro has not publicly stated how much that contract would be worth.
But it is likely to be worth at least $1.2 billion, which is how much the contract was estimated to be worth in a report by Deloitte that had been unintentionally released during the BCUC’s review of the Site C dam.
The contract for the spillway has not been formally awarded yet. BC Hydro said it still must come to terms with the preferred bidder – AFDE – before a final contract is awarded.
The AFDE Partnership was one of four bidders shortlisted in the competition for the spillway contract. Others were Bechtel Canada Co., Peace River Hydro Partners 2 and Peter Kiewit Infrastructure Co.
During peak construction, the spillway and generating station contract is expected to employ up to 1,600 people, according to BC Hydro.
As per the NDP’s commitment to require project labour agreements on all the remaining work on Site C, BC Hydro stated that the AFDE Partnership has signed a project labour agreement with three unions: the International Union of Operating Engineers (IUOE) Local 115, the Construction and Specialized Workers Union (CSWU) Local 1611 and the Construction Maintenance and Allied Workers (CMAW).
The agreement obliges the consortium employ up to 25% of its workforce as apprentices.
The third largest contract, to build the new transmission lines, has not been awarded yet. A request for proposals for that contract went out in September.