2.15 Construction-related issues can extend into the operating phase of projects. Thereafter, we are currently only aware of two projects where problems that first arose in the operating period have led to investor losses (Figure 6). As project financial performance is not generally publicly reported, and investor losses can be incurred in situations where service performance is not adversely affected, neither authorities nor the general public will always be aware whether investor losses are being incurred during the operating phase.
Figure 6 Examples of projects where equity losses may relate to service delivery problems | |
Project | Outcome for equity investor |
Defence Animal Centre (2009-10) | The Authority terminated this contract in February 2010 on grounds of contractor default. The project company accounts to December 2008 showed £850,000 as a shareholder loan before going into voluntary administration in August 2009. |
Cornwall New Schools (2009) | The Authority terminated the contract for unsatisfactory performance and New Schools Cornwall went into administration. The liquidator's report indicates that the investor's equity of £4.8 million was lost. |
NOTE 1 Public reports of losses do not always distinguish between investor losses and contractor losses. In some cases, contractors have incurred losses to rescue the project company. Source: National Audit Office document review and past reports | |