FINANCE

Published: 03/02/2005, Volume II4, No. 5941 Page 9

The trusts at the centre of the troubled Paddington health campus project will have to make a massive pay-off if the private finance initiative scheme fails or runs late.

Confidential papers from the new outline business case, seen by HSJ, estimate that compensation payments could be up to£25m if the scheme is terminated before financial close in 2008.

The money would be payable to Paddington Development Corporation Ltd, which owns the 1.3 hectares of land in the Paddington basin.

The confidential appendix says the land in question could cost£130.4m, including a premium of 58 per cent. A PHC spokesperson said this week that the premium had been miscalculated and was in fact 33 per cent.

But the preferred option is a joint venture agreement with the landowner which reduces the price to£99m - with PDCL obtaining land that will be vacated by St Mary's and Royal Brompton hospitals.

The£99m includes annual payments to PDCL of£9.1m until July 2008 as compensation for not developing an office scheme. But if the project runs late, this will rise to£13.65m per year until July 2010, when PDCL will have a right to terminate the agreement.

The appendix states: 'The OBC assumes that the PFI procurement can be completed within 36 months and makes no allowance for the possibility of future delay.'