Niagara Health System AFP Project Reaches Financial Close

The Niagara Health System (NHS) project reached financial close on March 27, 2009. The project is an Alternative Financing and Procurement (AFP) project for the design, build, finance and maintenance aspects of a greenfield 970,000 square foot hospital and cancer centre in St. Catharines, Ontario. Payments to cover construction, building maintenance, lifecycle repair and renewal and project financing will be made on an availability and performance basis, in a total amount of $1.42 billion over 30 years, or a net present value of $759 million.

NHS and Infrastructure Ontario were the public-side co-sponsors of the project. Infrastructure Ontario, the Crown corporation dedicated to the renewal of Ontario's public assets, assisted NHS with the procurement and implementation of the transaction. NHS is Ontario's largest multi-site hospital amalgamation comprised of six hospital sites and an ambulatory care centre serving 434,000 residents across the 12 municipalities making up the Regional Municipality of Niagara.

Following a two-stage procurement process, a consortium headed by Plenary Health was named as preferred bidder on August 8, 2008 and reached commercial close on September 24, 2008. Plenary Health finalized its financial partners and reached financial close on March 27, 2009.

The state-of-the-art health care complex to be located at First Street and Fourth Avenue in St. Catharines will replace the aging St. Catharines General Site and Ontario Street Site (formerly the Hotel Dieu Hospital) and will provide new regional healthcare services never before available in Niagara, including treatments for cancer, heart disease and longer-term mental health disease.

Construction of the new facility will be completed by the end of 2012, and the new health-care complex, which will remain publicly owned, publicly controlled and publicly accountable, will open its doors to patients in 2013.

Plenary Health's team includes Plenary Group and Borealis Infrastructure, as equity investors, PCL Constructors Canada Inc. (PCL), Bregman+Hamann Architects, Silver Thomas Hanley Architects and Johnson Controls Inc.

The long-term bond financing for the NHS project was arranged by TD Securities Inc., RBC Capital Markets and BMO Capital Markets. Société Générale, TD Bank and Bank of Montreal provided construction financing for the project. Long-term financing is provided through the private placement market. Borealis Infrastructure provided the majority of the equity required for the project.

Plenary Health subcontracted the design-build aspects of the project to PCL, which in turn arranged for architectural services through Bregman+Hamann and Silver Thomas Hanley. Plenary also subcontracted the hard facility management and lifecycle aspects of the project to Johnson Controls Inc.

The deal is significant as Infrastructure Ontario's first full DBFM hospital project under the AFP model, the largest project completed by Infrastructure Ontario to date, and the first major Canadian AFP/PPP project to source and secure fresh financing since October 2008, when credit availability and terms tightened dramatically.

Infrastructure Ontario was represented in-house by Steven Richards and Graham McLeod and by its external counsel, Bennett Jones LLP, which also represented NHS. The Bennett Jones team was led by Mark Bain and Tara Mackay and included Dan Ford and Jeff Heinbuch (finance), Paul Blundy (construction), Scott Martyn (real estate), Mary Beth Currie (labour and employment), Steve D'Arcy (tax), Art Peltomaa (research), Sean Maxwell (pensions) and Adrienne Moore (commercial).

Plenary Health was represented by Davies Ward Phillips & Vineberg LLP with a team that included Robert Bauer, Steven Martin, Matthew Singerman and David Reiner (corporate/real estate), Paul Martin, Tim Baron, Peter Westcott and Banu Unal (finance) and Neal Armstrong (tax). Borealis Infrastructure was represented by John Knowlton, executive vice president and general counsel, and Ogilvy Renault LLP with a team that included Nick Williams (projects/finance), Eric Reither (corporate), Geoff Gilbert (projects/finance), Geoff Walker (tax), Ciprian Gligor (projects/finance) and Will Chung (corporate).

PCL was represented by Don Lucky and John Paul Janssens of Reynolds Mirth Richards & Farmer LLP. Johnson Controls was represented by Darryl Brown, Farida James and Faithe Holder of Gowling Lafleur Henderson LLP.

The lenders (for the construction bank financing and long-term bond financing) were represented by Brian Kelsall, Ella Plotkin, John Sabetti and Marc Lefler of Fasken Martineau DuMoulin LLP.