Crisis-hit Jarvis sells PFI bids

Beleaguered engineering firm Jarvis took another step in its restructuring today by agreeing to sell its Private Finance Initiative bidding operations.

Jarvis said it had reached an agreement in principle to dispose of the PFI activities to French construction group Vinci for an undisclosed sum.

The deal, if approved, would involve the transfer to Vinci subsidiary Vinci Investments of Jarvis’ facilities management team and four contracts on which the company has reached preferred bidder status.

The contracts include a deal to refurbish and maintain 37 schools in Norfolk and other schools projects in Manchester, Cork in the Irish Republic and Bangor in Northern Ireland.

Jarvis is selling the PFI operations – part of its accommodation services division – following a string of problems that have contributed to the group’s crisis.

Last month, the firm learned it had lost its second school building contract in as many months after Kirklees Council in West Yorkshire decided not to proceed because of concerns over the “future ownership” of the accommodation services arm.

The council had chosen Jarvis as preferred bidder to build and maintain four new schools under a Private Finance Initiative (PFI) agreement worth £65m (€94.8m) over 25 years.

Just last month, a similar £175m (€255.3m) deal to build 10 schools for Fife Council also collapsed.

The group is scaling back its accommodation services division to focus on UK rail renewal and local authority contracts.

It handed back its rail maintenance contracts to Network Rail following a number of derailments and its involvement in the Potters Bar rail crash.

In July, the group unveiled a survival strategy after securing the support of its lenders for another eight months.

Jarvis said it had fallen £246.7m (€359.9m) into the red because of £100m (€145.9m) of losses on construction contracts in its accommodation services arm and write-downs on the value of its businesses.

Last month, the group said chief executive Kevin Hyde was leaving after just over a year in the position.

His departure was announced as the Association of British Insurers (ABI) hit out at the firm over “excessive” executive bonuses during 2002/3, including £137,000 (€199,917) for Mr Hyde.

Vinci still has to examine the books of the PFI operation and complete documentation before signing today’s deal, Jarvis said.