5.30 The Treasury's Refinancing Taskforce, part of the OTF, provides support to operational PFI project refinancings. Refinancing is a specific, and often highly technical, issue faced by some PFI projects. PFI: Strengthening long-term partnerships noted that a small but significant number of PFI projects had amended their financial arrangements with debt providers and that all PFI projects were now subject to a gain sharing arrangement between the PFI contractor and the procuring authority. Refinancing has continued at a modest pace, with the Government receiving over £150 million from these arrangements in total.
5.31 The Government continues to support value for money refinancing and is currently reviewing, based on comments received from the market and procuring authorities, Application note - value for money in refinancing5. If it is determined that any aspects require clarification, an addendum to the Application Note will be issued. Where, under alternative delivery models, there may be a prospect of refinancing gains at a future date, the Treasury will expect gainshare mechanisms, based on principles similar to those set out in SoPC4, to be included in the contract.
5.32 Changes to the terms of debt financing generally result in a reduced ongoing cost of the initial debt over the remaining life of the project. The benefit of this change can accrue over time, or at the time of the refinancing where the structure of the debt is consequently altered and the total borrowing level increased. The provisions of the voluntary code and SoPC4 deal with the complexity that can be involved in determining the value of such changes.
5.33 In some cases, however, a contractor is able to negotiate a change in debt funding terms, in recognition of changes in the project's risk position or in the debt market generally. Where such a change is straightforward and does not involve a restructuring of the loans, the cost of full compliance with the provisions of the voluntary code or contract provisions may outweigh the benefit from the change. Treasury intends to issue guidance to enable simple refinancings, where there is no change to public sector liabilities in the event of termination, to proceed in circumstances where no refinancings would otherwise take place.
5 Application note - value for money in refinancing, HM Treasury, 2005