Bovis Lend Lease and the Bank of Scotland have entered into a 50/50 joint venture which will initially hold and manage $A124 million equity investments in 11 United Kingdom Government Private Finance Initiative projects.
Prior to the joint venture, Bovis Lend Lease held equity interests in all 11 PFI projects, while the Bank of Scotland held interests in nine.
With the exception of Leeds Hospital, all PFI projects have reached financial close and are in the operational phase of what are typically 25-35 year develop, construct and manage contracts.
Under the joint venture, Bovis Lend Lease will receive a net payment of $A25 million because its stake in the portfolio war larger than the Bank of Scotland.
Bovis Lend Lease will recognise an after tax gain of approximately $A20 million as a result of equalising investments.
Bovis Lend Lease chief executive Bob Johnston said the joint venture with the Bank of Scotland was strategically important to Lend Lease from both an investment and operational point of view.
“Bank of Scotland is highly experienced in the UK PFI market and is our preferred partner. In the joint venture we can achieve a number of advantages that would not flow to the parties operating on a stand-alone basis.
“The joint venture structure is consistent with Lend Lease’s business model because it increases the potential velocity of our capital, while maintaining access to long-term investment, construction and facilities management earnings streams.
“It is a key plank in our plan to optimise funding flexibility and strategic capabilities to participate in future PFI market opportunities,” Johnston said.
The Bank of Scotland’s head of infrastructure finance Gershon Cohen said the joint venture takes the relationship a big step forward, meeting the public sector’s needs for owner/operator partners for major infrastructure renewal.
Lend Lease has a total investment portfolio of 14 PFI projects in the UK and Ireland that have so far reached financial close. Only Roehampton, Romford and Manchester Hospital PFI projects are not included in the initial joint venture with the Bank of Scotland.
The 14 projects represent a total construction value of around $A3.4 billion, of which 11 are operational while three are still under construction.
Prior to the joint venture, Bovis Lend Lease’s total equity commitment to the 14 projects was $A114 million, of which $A58 million is already invested.
By Nelson Yap
