3.1 The return to investors is value for money if there has been sufficient competition to provide the equity and there is evidence that their expected rate of return is comparable to other investment opportunities with similar risk. However, PFI contracts are not easily compared with other types of investment. Without clear comparators, we investigated six factors relevant to PFI equity rates of return:
• How equity is priced in PFI contracts.
• Meeting lenders' requirements.
• Changes to investors' returns from project performance.
• Increased returns following debt refinancing.
• Primary investors' returns from sales of equity.
• Secondary investors' returns.
We also set out an illustrative analysis of individual project returns and comment on alternative models for remunerating investors.