Any conclusions about the benefits brought by private finance must be provisional and tentative, since the corpus of evidence is still growing as the project pipeline matures. However, the following propositions appear to have sufficient evidential weight behind them to be worthy of the attention of policymakers:
• The use of private finance has increased the focus on risk analysis and allocation which has had beneficial effects going beyond PFI.
• It has also increased due diligence disciplines. This is mainly attributable to the role of those entities taking, or opining on, senior credit risk: lenders; monoline insurers; and rating agencies.
• The integration of Design, Construction, Maintenance and Operations would not have been as secure or as effective as it has been without the long term glue provided by equity.
• The beneficial impact of senior debt appears to diminish after financial close. In particular, there is no successful track record of senior lenders stepping in to sort out failing projects in the way envisaged in the PFI contracts, though there have been instances (e.g. Jarvis, see Case Study 4, page 13) where senior debt has played an active role in trying to sort problems out, falling short of step-in. The pain taken by senior debt on termination or restructuring has been limited.
• There is some emerging evidence that the long term financial exposure of equity is one of the reasons why public sector clients have been generally satisfied with the performance of operational PFI projects.
• There has been at least one prominent example (Jarvis) where equity has injected additional funds to complete failing projects in the construction phase. There is no real evidence either way yet on whether it will do the same for struggling operational projects.
• Equity has taken considerable pain on those projects that have failed. As well as shielding the public sector to some extent from the financial impact of those failures, this has had a salutary effect in underscoring the risks taken by equity.