PracticePeople In PracticeAccountancy Age: Company collapse sparks PFI liquidation fees

Accountancy Age: Company collapse sparks PFI liquidation fees

A corporate vehicle being used to deliver a health service building contract has become the first company set up to deliver a private finance initiative deal to go into receivership.

Fears will now be raised that the receivership could signal the beginning of a flood of PFI-related liquidations.

Mayday Healthcare National Health Service Trust in Croydon has called in RSM Robson Rhodes as receivers for the PFI company set up three years ago.

Health managers have exercised their step-in rights after the ‘vehicle’ company, Mayday Energy Centre Limited, was unable to complete on time construction work on a hospital energy and waste incineration plant started in July 1997.

A PFI expert said it was ‘inevitable’ that a vehicle company at some point would go into receivership.

Health managers pulled the plug on the 22-year £10m project, which had been contracted out to Scottish-based building group Miller Construction Ltd, after a two year wait for an Environment Agency commissioning certificate approving the design and build of the new incinerator.

Mayday chief executive Keith Ford said MECL missed the first estimated completion date in April 1998, the first deadline the following year and the final deadline this month.

‘The PFI element of the scheme was never tested,’ he said. ‘We never got beyond the construction phase and no initial payments were made. MECL failed to provide evidence that construction work had been carried out to standard and so we had to terminate the contract. We will now go to the market place and look for a bidder to finish the work.’

RSM partners Daniel Smith and Keith Hinds have been appointed as the joint receivers. Smith said: ‘The receivers will be investigating what remedies are available to MECL following the exercising of the Trust’s step-in rights.’

Local PFI project did not represent value for money, says Birmingham council FD

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