In a typical availability based PFI accommodation project, between 7 per cent and 15 per cent of the project financing requirement is provided through private sector equity. Over the life of the project, profits in excess of bid expectations have not generally been limited by the public sector and neither has government underpinned investor losses. However, reforms have been made to the PFI model over time that have allocated to the public sector a share of gains that have arisen due to market events, for example debt refinancing gains and sharing of insurance cost variations.
In other markets, different approaches are taken to limiting or regulating the economically efficient level of return that can be made by investors in infrastructure networks and services.
Question 18: Would a regulated asset model be more economically efficient than the PFI concession model? Question 19: What are respondents' views on an approach that capped equity returns or that provided for public sector sharing in returns achieved above a specified level? What impact would this be expected to have on investor appetite and pricing and on project performance? At what level should any cap or sharing threshold be set? Question 20: Should the public sector limit the transferability of PFI equity? What nature and quantum of limit would not adversely impact on investment appetite and pricing, and on project performance? Question 21: Should the public sector share in gains on sale of PFI equity, and what impact would this have on investment appetite and pricing? Question 22: What views do stakeholders have on public sector co-investment or joint venturing alongside private sector equity? What quantum or terms of public sector equity stake would not adversely impact investment appetite and pricing, and on project performance? |