The Cabinet will today be briefed about serious financial difficulties threatening the future of a British construction company due to build the Cork School of Music.
The company, Jarvis Construction, is in negotiations with banks to reorganise its £230 million debt, and its share price has fallen to 10 per cent of its value a year ago.
The Department of Education and Science has almost completed negotiations with Jarvis on the School of Music's design, building, maintenance and operation contract.
The project is behind schedule. The building will cost the State €8.2 million a year over 25 years, though it had to be reduced in size to keep it within budget.
International banks will have to sign off on the Cork deal before a final contract can be signed with the Department, though some insurance issues are still outstanding.
The Minister for Education and Science, Mr Dempsey, will brief colleagues today on the difficulties facing Jarvis, which have only emerged in the last week.
Jarvis has already built five post-primary schools in the State: in Tubbercurry, Co Sligo, Clones, Co Monaghan, Shannon, Co Clare, and Ballincollig and Dunmanway in Co Cork. Under the terms of the latter deal, the British company is supposed to fit equipment that will last for 40 years and maintain the schools for 25 years.
However, the Times Educational Supplement has warned that the Jarvis crisis could leave British schools built under the British government's Private Finance Initiative in serious difficulty.
Jarvis has some £4 billion worth of PFI contracts in Britain, mainly schools, and it is responsible for maintaining nearly 100 schools there under contracts similar to the second-level schools' contracts agreed with the Department of Education and Science.
The company's two main bankers, Royal Bank of Scotland and Barclays, have received a report on its state of health from Deloitte and Touche, following Jarvis' admission 10 days ago that it was in breach of covenants agreed with the banks.
Jarvis has issued four profits warnings in recent months and is facing pressure to restructure its business. Its delayed 2003 results must be published before the end of the month, British business sources have said.
The school was originally supposed to be built by the start of 2005 as part of Cork's City of Culture festivities, but it will not now begin before next June.
The Comptroller and Auditor General, Mr John Purcell, has expressed concerns to the Dáil's Public Accounts Committee about the way in which the project has been managed.
The decision by the Department to choose Jarvis as a preferred bidder before the affordability of the project had been established left the State open to claims for compensation if it did not go ahead. It might also have been better to run a concurrent "shadow competition" based on the original estimates.