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Carillion contracts: Update on key projects

The liquidation of Carillion has left dozens of contracts at varying stages of completion. CN looks at the latest updates from 17 of the collapsed firm’s major projects.

Army Basing Programme

  • Value: £1.5bn
  • JV partners: KBR
  • Contract type: Public
  • Status: Work is ongoing

A statement from Aspire – the company established through a joint venture between Carillion and KBR to deliver the project – said there will be no disruption to works.

The statement said: “We do not anticipate any disruption to payment of staff and suppliers. Aspire Defence Capital Works, Aspire Defence Services and Aspire Defence Services Limited are joint ventures between Carillion and KBR.

“The insolvency of Carillion has triggered certain contractual arrangements that ‘ringfence’ the joint ventures from Carillion.

“These are designed to ensure the project continues to deliver services and the ABP works, mitigating any potential effects of the liquidation. Contingency plans have been put into action and contractual discussions are under way.”

A 50:50 joint venture between Carillion and KBR was awarded a construction and FM contract by the Ministry of Defence worth over £1.1 bn in November 2017.

Construction works have an estimated value of £680m, with the JV contracted to design and build 130 new buildings, and provide extensions and alterations to existing buildings.

BT Openreach

  • Value: £1.5bn
  • JV partners: Telent
  • Contract type: Private
  • Status: Work is ongoing

Telent has said the joint venture established between the two firms to establish Carillion telent (the company delivering the works) gives Telent the right to assume control in the event of liquidation.

Telent said in a statement: “The Carillion telent joint venture was established with Carillion in 2009, with a legal structure that gives telent the right to step into 100 per cent of the joint venture in the event of insolvency, enabling the JV to continue to operate, providing continuity and business as normal to its customers, workers and subcontractors.”

In February 2017 Carillion telent, a 60:40 Carillion-led joint venture, signed a three-year extension – with the possibility of a further two years – to its support services framework agreement with BT Openreach, worth up to £1.5bn.

The JV provides maintenance, extension and repair of the telephone and data network in the North-east, Midlands & Wales, the South-west, and London & north Home Counties.

Carillion’s share of deal was expected to be £500m over the three years, rising to £900m if the contract was extended by a further two.

Airport City

  • Value: £800m
  • JV partners: Beijing Construction Engineering Group
  • Contract type: Public
  • Status: Work is ongoing

MAG Property CEO and director of the Airport City joint venture Lynda Shillaw said: “The Airport City joint venture is focused on working with our investors and occupiers in the planned next phase of delivery to ensure that their requirements continue to be met.

“The current construction of the Airport City development is being undertaken by Beijing Construction Engineering Group International and is not affected by the issues at Carillion. 

Manchester Airports Group picked a joint venture made up of Beijing Construction Engineering Group, Carillion and the Greater Manchester Pension Fund to develop the £800m Airport City project in 2013.

The deal covers the development of a 60 ha site to provide 464,000 sq m of new business space featuring hotel, office, retail, advanced manufacturing and logistics.

HS2 – Lots C2 and C3

  • Value: £724m and £616m
  • JV partners: Kier, Eiffage
  • Contract type: Public
  • Status: Work is yet to commence

Kier has said contingency plans are in place to ensure its JV with Eiffage is able to deliver the project irrespective of Carillion’s liquidation, and does not anticipate any disruption to its services. 

Carillion was a big winner in the HS2 civil works packages as part of a joint venture with Kier and Eiffage, scooping two central packages worth a combined £1.34bn.

The JV was awarded the C2 North Portal Chiltern Tunnels to Brackley, worth £724m. This section of the track is 47.6 km long and includes a maintenance depot at Calvert and a green tunnel at Wendover. The C3 Brackley to Long Itchington Wood Green south portal is worth £616m and covers 47 km of track.

Aberdeen Western Peripheral Route

  • Value: £530m
  • JV partners: Balfour Beatty, Galliford Try
  • Contract type: Public
  • Status: Work is ongoing

JV partners Balfour Beatty and Galliford Try will continue to work on and deliver this project.

The £750m Aberdeen Western Peripheral Route is one of the largest infrastructure projects in Scotland.

It was awarded to a joint venture made up of Balfour Beatty, Carillion and Galliford Try in December 2014, following a 23-month procurement process.

Transport Scotland has said it fully expects work on the site to continue as Balfour Beatty and Galliford Try to remain responsible for the completion of works.

In a trading update, Galliford Try said: “Our current estimate of the additional cash contribution outstanding from Carillion to complete the project is £60m-£80m, of which any shortfall will be funded equally between the joint venture members.”

Smart motorways upgrade

  • Value: £475m
  • JV partners: Kier
  • Contract type: Public
  • Status: Work is ongoing

Kier has said it expects to deliver this work. CN understands that the fate of Carillion staff on site will only become clear once Kier establishes how it will deliver the work.

In joint venture with Kier, Carillion secured a smart motorways package with an estimated value of approximately £475m.

The package involves transforming four sections of motorway in England into smart motorways: the M6 between junctions 16 and 19 and junctions 13 and 15, the M20 between junctions 3 and 5, and the M23 between junctions 8 and 10.

Work on the first tranche of the package on the M6 commenced later than expected in February 2016. The contract for this segment of the work is worth £129.5 m.

The other batches are scheduled for delivery over the next four years and final target costs for these schemes were to be agreed with Highways England.

Midland Metropolitan Hospital

  • Value: £430m
  • JV partners: n/a
  • Contract type: PPP
  • Status: Work has stopped

Work on this PPP hospital had been scheduled to complete in the summer of 2018. However, the programme has been hit by delays.

Sandwell and West Birmingham Hospitals NHS Trust chief executive Toby Lewis said: “We are working closely with HM Treasury and the Hospital Company as alternative arrangements are put in place to ensure that the construction of the Midland Metropolitan Hospital is completed.” 

The Hospital Company is the separate JV entity established by Carillion to deliver the project, as per the terms of its deal. The Hospital Company then contracts Carillion’s construction arm to deliver the work.

Sandwell and West Birmingham Hospitals NHS Trust selected a Carillion joint venture to deliver the Midland Metropolitan Hospital in Smethwick, near Birmingham.

The 30-year concession contract was worth £430m in construction and support services to the JV.

Carillion expected to invest £16m of equity in the project, with work starting at the site in 2016. 

First Street Manchester

  • Value: £400m
  • JV partners: None
  • Contract type: Private
  • Status: Work has stopped

This 173,000 sq ft office was originally scheduled for completion in autumn 2017, but this was delayed after the cladding subcontractor went into administration.

Liverpool Royal Hospital

  • Value: £355m
  • JV partners: None
  • Contract type: PPP
  • Status: Work is ongoing

Work stopped at the site on on Monday when Carillion’s liquidation was announced. However, CN understands work restarted on Tuesday.

Royal Liverpool and Broadgreen University Hospitals chief executive Aidan Kehoe said: “The Hospital Company who are contracted to deliver the project is empowered to terminate existing contracts and engage a new contractor to complete construction.

“They also have access to insurance funds to enable it to complete the project.

“The Hospital Company is now enacting these plans. They are also arranging for a new company to be established that facilities management workers will be transferred to immediately to ensure work can continue and staff and suppliers can continue to be paid.”

The project had been due to complete in March 2017 but further delay had been announced as recently as two weeks ago.

The Royal Liverpool is believed to be one of the three UK contracts that contributed to the contractor’s first major profit warning in July last year, which saw its share price plummet and chief executive Richard Howson depart.

Midland Main Line improvement programme (electrification)

  • Value: £260m
  • JV partners: Powerlines Group
  • Contract type: Public
  • Status: Work is ongoing

Midland Main Line improvement programme (track work)

  • Value: £62m
  • JV partners: None
  • Contract type: Public
  • Status: Work is ongoing

Network Rail said in a statement: “Carillion’s work for Network Rail continues for the time being as Network Rail works with the official receiver and special manager to ensure the continuity of its project work.”

Carillion bagged the two contracts by Network Rail in November 2017, worth a combined £322m, as part of the Midland Main Line improvement programme.

The first of the two contracts was for an upgrade to the existing track and infrastructure on the route from London to Corby, and was set to generate revenues of £62m for the company over two years.

The second deal was won as part of a 50:50 joint venture with Powerlines Group and covered the electrification of the route from London to Corby, worth £260m over three years.

Angel Gardens

  • Value: £154m
  • JV partners: None
  • Contract type: Private
  • Status: Work has stopped

CN understands work is expected to restart in a matter of days instead of weeks, as developers have contingency plans in place to deal with the collapse of a contractor.

Moda Living and Apache Capital Partners appointed Carillion as the main contractor to deliver the £154m Angel Gardens development in Manchester. A 36-storey residential tower forms the centrepiece of the scheme, which is described as the UK’s largest build-to-rent project.

Work started at the site in January 2017 and was scheduled to be completed in 2020.

Bart’s Square

  • Value: £137m
  • JV partners: None
  • Contract type: Private
  • Status: Work has stopped

Carillion was working on Helical Bar’s Bart’s Square commercial scheme in the City of London, but work is understood to have halted.

Lincoln Eastern Bypass

  • Value: £96m
  • JV partners: None
  • Contract type: Public
  • Status: Work has stopped

Carillion beat three other bidders to win this contract to build a 7.5 km road back in October 2016. 

The project will link the A158 Wragby Road roundabout to the A15 at Bracebridge Heath. 

East Leeds Orbital Road

  • Value: £75m (£115m scheme)
  • JV partners: None
  • Contract type: Public
  • Status: Work is yet to commence

Leeds City Council said in a statement: “Recently the council tendered a contract for the East Leeds Orbital Road and Carillion were the successful tenderer.

“However, the final contract had not been awarded and we will now review the tender process before determining how to proceed without Carillion.

“The council is now looking at options regarding future procurement strategy for ELOR, which are likely to include using the existing procurement exercise to secure an alternative contractor or re-tendering.”

University of Manchester – Fallowfield Student Residences

  • Value: £73m
  • JV partners: None
  • Contract type: Public
  • Status: Work has stopped

University of Manchester named Carillion preferred bidder for this student halls job in April last year.

The contractor was selected to deliver phase one of the Fallowfield Residences project in the south of the city. The project involved construction of 1,122 student bedrooms across eight blocks as well as an energy centre, student hub and landscaped grounds.

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