Refinancing is often undertaken by PPP contractors once the required service has been brought into operation. This is because the risks associated with construction and commencement of service delivery have passed. This creates opportunities to reduce the annual financing costs, as funders are prepared to offer better terms for projects with lower risks. Refinancing has also been brought about by improved financing terms that can be applied to early projects as PPP has become an established procurement method with which the financing market is familiar. The following factors should be noted:
a. Refinancing is usually very complex and may be difficult (or impossible) to identify if private sector partners do not reveal their intentions, albeit contractually they are obliged to.
b. Procuring Bodies often have limited resources to manage their existing PPP relationships. Expert assistance is likely to be needed to ensure that Refinancing of existing contracts is handled properly and that the public sector receives the maximum financial benefit from the process.
c. The Refinancing Taskforce set up within HMT / Partnerships UK and resourced centrally is now facilitating input and overseeing guidance relevant to refinancing transactions across the UK market.
d. The Code of Conduct is resulting in refinancing gains from older PPP projects exceeding what might have been negotiated individually.