Pandemic hampers infrastructure projects: Fitch

The economics of public/private partnership (P3) infrastructure projects in Canada may come under pressure due to Covid-19, as operating costs rise to meet more stringent public health requirements, suggests Fitch Ratings in a new report.

The rating agency says that the pandemic represents a challenge to the existing financial metrics of Canadian P3 infrastructure projects.

Over the last 15 years, Canadian governments have used the P3 model to develop more than 100 major infrastructure projects, Fitch reported. And, it noted, these projects have generally proven resilient to shifting requirements.

Now, however, the Covid-19 pandemic will test that resilience as tougher government standards — such as increased space requirements to allow physical distancing, more frequent cleaning or major retrofitting efforts — are adopted to contain the spread of Covid-19, Fitch stated in the report.

“New safety standards, reduced operating efficiencies and increased social distancing measures” may boost operating costs, which could “materially reduce margins in projects operating under fixed-priced contracts,” and may then negatively affect their credit quality, it noted.

“Uncertainty and lack of visibility with respect to the length and severity of the current crisis that could result in additional costs and requirements will be a major challenge for projects in operation,” Fitch said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.