A $1 billion refurbishment of the John Hart generating station in Campbell River was declared completed on time and on budget, but the main contractor on the project has yet to receive a final payment from BC hydro, putting its credit rating at risk.
In December, BC Hydro declared the John Hart generating station refurbishment project was “now in service – on time and on budget.”
But the contractor that did the work as part of a public-private partnership, InPower BC General Partnership – a subsidiary of SNC-Lavalin – isn't yet getting its full payments, according to DBRS, a New York credit rating agency.
As a result, DBRS has placed InPower’s credit rating “under review with negative implications.”
InPower won the contract to refurbish the John Hart hydroelectric dam, which was originally built in 1947.
Although BC Hydro has now assumed ownership and control of the project, InPower is not yet receiving its full monthly "availability payments" from BC Hydro, which are subject to a final service commencement. Availability payments are payments to be received by the project company from the funding authority (BC Hydro) for their services, which includes keeping the facility operational.
But that final service commencement has been delayed, in part because BC Hydro asked for a delay to a final performance test that is required. And now, due to low water levels, it is possible that that testing could be delayed further.
"They were were supposed to start receiving more availability payments starting from, I think, November 2018, but because of the delay they were not able to receive the full payment," said Kevin Li, senior vice president of infrastructure finance for DBRS.
According to DBRS, InPower has received 80% of the availability payments due upon reaching certain milestones. But it is still short 20%. Li said it is contractors, not InPower, that are still awaiting final payments for work done.
"So the contractors are taking the loss," Li said.
“If it becomes apparent that Service Commencement will be further delayed and materially encroach on the Senior Creditors’ Service Commencement Longstop Date, a negative rating action may result,” DBRS warns.
“Conversely, if the Service Commencement is successfully achieved in May 2019 and if no material delay is anticipated in achieving Total Completion, the Under Review status can be resolved.”
BC Hydro did not respond to a request for comment. But in am email, InPower CEO Paul Sawyer said that low water levels are not holding up testing.
"Final testing is in fact underway as we speak," he wrote.
He also said that subcontractors are being paid.
"InPower BC, through our project agreement with BC Hydro, will receive the remaining 20 per cent of the monthly availability payment once our final steps are met," he said.
