9.30 The Spens clause, which applies to listed bonds in the UK only, provides for a termination payment that compensates the bondholders for lost risk margin when a bond is terminated. This will only be an issue in extremely rare circumstances and for the small proportion of PFI projects financed by bond issues.
9.31 The Government is concerned that the Spens related payment represents an unnecessary extra cost of termination for a PFI project over a traditionally financed project in the rate circumstances where it wishes to voluntarily terminate due to major changes in the public sector's requirements which cannot otherwise by accommodated. The Government is content to retain the Spens payment in circumstances of authority default and force majeure.
9.32 The Government is aware that a change in the application of the Spens clause would be considered a major change to the way bond investors preserve their long term interests when they invest in PFI projects. The Government also recognises that the circumstances in which it wishes to voluntarily terminate without the Spens clause are extremely rare, and should be limited to major changes in public service needs. It intends to enter into consultation with issuers and investors over the next six months to see in what circumstances investors would be willing to voluntarily forego this protection in these limited circumstances.