Swedish hospital PPP cost lowered to guarantee consensus

The Scandinavian country’s first hospital PPP saw its total cost lowered by SEK2bn to guarantee broad political support for the project. This has led Skanska, which won the contract together with Innisfree, to cut its equity allocation to SEK600m from an original SEK650m.

The cost of Sweden’s New Karolinska Solna hospital – the country’s first healthcare public-private partnership (PPP) – has been reduced by SEK2bn (€208 million; $250 million) to guarantee broad political support for the project.
 
This has led Skanska, which won the contract on May 4 together with UK investment fund Innisfree, to lower its equity allocation for the deal to SEK600 million from an original SEK650 million, the company said in a statement.
 
The new deal was reached two days ago and was necessary to secure an agreement among all the political parties, even though the political majority could have pushed it through, a government spokesman pointed out.
 
The spokesman said there was opposition to using the PPP model from the start, as some parties were not happy with the increased financing costs associated with the risk transferral inherent in PPPs. “It’s like taking insurance when you build a house: it costs more and you can argue it’s not needed if things go well. But if they don’t, you’ll be happy you paid for it,” he added.
 
It’s also a matter of decreasing political risk for a long-term contract, explained county commissioner of finance Catharina Elmsater-Svard. “The deal was necessary in order to reach political unity in the Stockholm county council. We felt that political unity is necessary to guarantee the stability of the project over many years. Also, political unity decreases the level of political risk,” she said.
 
Skanska and Innisfree will be responsible for financing, construction, operation and maintenance of the new hospital until 2040. The construction contract originally amounted to a total of SEK 14.5 billion.