New hospital-tender a real possibility

PHILIPSBURG – A new tender for the construction of St. Maarten’s General Hospital is a real possibility it appeared during Monday’s meeting of Parliament about the financing of this prestigious project. The lenders – among them the general pension fund APS and social and health insurances SZV – are still doing their due diligence to determine whether the Italian contractor INSO remains a viable partner to execute the construction and to take care of maintenance. Currently, the lenders are “not convinced,” St. Maarten Medical Center’s director Kees Klarenbeek said.

Members of Parliament Ardwell Irion and Christophe Emmanuel (both National Alliance) both openly doubted that INSO is able to live up to its commitments. “Minister Lee said a while ago that INSO is ready to go but I am not convinced and neither are the lenders,” Irion said.

Emmanuel pointed out that INSO’s parent company Condotte d’Aqua S.p.A. recently lost the contract for the Follo Line railway project in Norway. Bane Nor reasoned that “any further cooperation would involve high risk. To secure the economy, quality and progress of the Follo Line the contracts with Condotte have been terminated.” the railway company reported on its website.

While initial reports immediately suggested that INSO is bankrupt, according to the information parliament received on Monday this is not the case.

Klarenbeek said that at Condotte’s request INSO was admitted into the company’s Extraordinary Administrative Procedure (EAP) on December 5 of last year. The company is now under government-control and under supervision of three government-appointed Extraordinary Commissioners.

INSO sought protection under the EAP due to financial troubles at the parent company. Condotte suffered “a significant loss” on the construction of a railroad station in Florence; the government has canceled this contract.

Italy introduced the EAP in 2003 under the Marzano Law as a special regime for very large companies. “”The explicit goal of the EAP is to preserve the company, despite its state of insolvency, through restructuring or reconversion of the economic activity of the group, typically via a sale,” Klarenbeek explained.

Companies in EAP have access to financial support from the Italian government. Condotte already received such support, the hospital director said.

It is therefore likely that INSO will be sold before the EAP protection expires in December of this year. The construction company has a project portfolio of €1.3 billion ($1.47 billion) – five to six times the company’s annual revenue. INSO’s eventual buyer “is bound to all stipulations of SMMC’s contract,” Klarenbeek said. The hospital’s protection is laid down in the performance bond.

While the sale might take six months – or longer – INSO is “financially able to continue its business operations as the old debts are frozen; if needed they will receive further financial support from the Italian government.”

The sale and purchase is subject to approval by the Italian government.

The Extraordinary Commissioners have confirmed that INSO is able to provide all the agreed upon securities under the contract with the SMMC; the Italians are willing to offer additional security in the form of a dedicated project bank account. SMMC obtains the right to deal directly with sub-contractors in case INSO is structurally unable to pay them.

SMMC is prepared to continue with INSO as the main contractor, but Klarenbeek said that this is subject to approval by the lenders consortium. Members of this consortium are, among others, SZV, APS, the Windward Islands Bank (WIB), pension funds of Curacao (APC), Vidanova, Fatum and Isla and the St. Maarten Recovery, Reconstruction and Resilience trust fund.

“The lenders are not yet convinced that INSO is financially strong enough to perform under the contract,” Klarenbeek said.

For the hospital-director, the decision about INSO is still up in the air: “We are working with all parties to arrive at a timely and well-motivated decision to either continue with INSO or to terminate that contract and do a new tender based upon the progress made to date.”

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