Q419 Chairman: Welcome to the Economic Affairs Committee. This meeting is the eighth public hearing of our inquiry into private finance projects. Copies of the members' entries in the Register of Interests and of interests declared as relevant to this inquiry are available to the public and to the witnesses. Mr Olsen, Mr Turville, Mr Waterston, welcome. Thank you for sparing your time this afternoon. We would be grateful if you could speak reasonably clearly and slowly for the benefit of the webcast and the shorthand writer. When we reach the questions, in order to save time, if one person answers and the others are happy with that answer, then leave it at that, but feel free, if you want to add to the first answer, to do so. Would you like to make an opening statement or should we go straight into questions?
Mr Olsen: Happy to go straight to questions.
Q420 Chairman: Perhaps I might start with the first question, a general question. What has been the impact of the recent financial crisis on raising funds for private finance projects?
Mr Olsen: Clearly the shortage of both capital and liquidity in the financial markets over the last 12 to 18 months has had a significant effect and influence upon the ability for projects to find banking finance over the last 12 to 18 months of the process. A number of projects have closed but a number have struggled to find sufficient lending capacity from the markets to permit those to go to full financial close. There has been a significant effect on the availability of bank debt.
Mr Waterston: May I add that to an extent the withdrawal of all of the mono-line insurers from the markets and the lack of liquidity in the bond market have also resulted in less funding being available for PP projects and any other project finance transactions. I refer to the mono-line insurers because they insured the bond issues which used to fund project finance and gave them a high credit rating so they were able to be bought in the market.
Mr Olsen: A further by-product of the reduced capital and liquidity has been the disappearance of the syndication in the market. As banks have withdrawn or reduced their capabilities to lend, those banks which historically would have taken an underwriting position prior to syndicating into the market have ceased to do so.