The Bermuda Hospitals Board will make its first payment for the hospital redevelopment in 2014.

Health Minister Zane DeSilva told the House of Assembly under the agreement between Paget Health Services (PHS), the company that will be building and maintaining the property, and the Bermuda Hospitals Board (BHB), no money will exchange hands until the construction is completed.

He said: “Here's how the partnership works: PHS pays for construction of the new hospital building, and the BHB pays nothing until it is complete in three years' time to BHB's specifications .

“This means the BHB has had time to plan in advance for the payments to PHS that will begin in 2014 when the building is complete.

“In 2014, BHB makes a lump sum payment. After that, rather like a mortgage BHB makes annual repayments to the PHS for the duration of the concession 30 years.”

The annual repayments will cover the cost of the projects well as well as “lifecycle maintenance”. The BHB will also retain ownership of the land and building.

Mr DeSilva added: “Repayments are subject to deductions by BHB if the new building is not performing to BHB's pre-determined specifications and standards. This transfer of performance risk is on of the key benefits to a public private partnership.”

He added that the BHB would fund the payments with increased efficiencies and a one percent increase in hospital fees over five years as well as contributions from the Bermuda Hospitals Charitable Trust.

The BHB has not yet said how much the project will cost, but it is estimated to be $260 million. It will release further details in the new year.

The new building will include 90 single-occupancy en suite patient rooms, Bermuda's first dedicated day surgery unit and ambulatory care services like oncology, dialysis, asthma and diabetes management. It will also include diagnostic imaging services and a new emergency room and utility plant.