September 24, 2008

Parent company of BBPP Alberta Schools Limited suffers financial losses

The Australian-based investment group awarded a contract to build schools in Alberta under a public-private partnership is experiencing financial difficulties.

According to an article on the Financial Times website, Brown & Babcock Public Partnerships (BBPP) Ltd. recently laid off one-quarter of its 1,600 staff after losing billions in investments.

The Australian company is the majority owner of BBPP Alberta Schools Limited, the company awarded a 32-year P3 contract to build 18 school in Edmonton and Calgary.

Phil Green, chief executive, and Jim Babcock, executive chairman, agreed to step down from their positions after the company said first-half net profit fell 34 per cent to $211.08 million (Australian).

This year, the company has seen billions wiped from its market capitalization as a result of the turmoil in global credit markets, which has hurt its fee-driven business model.

The investment group’s market capitalization fell to A$800 million last month after the company’s shares emerged from a trading halt to plummet 36 per cent to A$2.41.

The shares were trading as high as A$33 in May 2007.

Added to this, the high debt load of the company highlights possible problems with leasing schools from the private sector.

“In the current credit crisis, the Alberta Government has set itself up with a company that could walk away from eighteen schools in mid construction,” said CUPE Alberta President D’Arcy Lanovaz, in the article.

“Or, if the company fails down the road, who knows who will end up operating the schools we send our children to.”

The Alberta government announced recently that it is moving forward with the second phase of a P3 project that will result in the construction of 14 new schools in growth areas of Edmonton capital and Calgary.

In total, eight school boards will receive new schools in the communities of Edmonton, Sherwood Park, Spruce Grove, Calgary, Langdon and Okotoks.

The new facilities will include elementary, middle and senior high schools that should be ready for student learning within the next five years.

JOC News Service

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