Appendix Two PFI Benchmarking

1  As part of the fieldwork, and under our direction, KPMG have benchmarked changes in the cost of PFI finance. The table at Figure 15 below sets out the effects on a base case model of a variety of changes, drawing on data taken from a broad sample of actual projects.

Figure 15

Impact on affordability of changes in financing terms from 2007 to 2009

Category

Assumption 2007

Assumption 2009

Annual unitary Charge (£)

Change in 2009 (%)

'Base Case' model (2007)

 

 

33,392

-

Debt amount as a percentage

89.7%

87.7%

33,790

1.19

Swap Rate (variable to fixed)

5.1%

4.3%

32,315

-3.23

Loan margin

0.79%

2.39%-2.59%

36,14 5

8.24

Arrangement Fee

1.1%

1.57%

33,530

0.41

Commitment Fee

0.38%

1%

33,575

0.55

Interval after final repayment

11 months

15 months

33,487

0.28

Minimum ADSCR/LLCR

1.17x/1.22x

1.19x/1.23x

33,500

0.32

Swap Credit Spread

0 .11%

0.25%

33,662

0.81

2009 model (from range of results)

25th Percentile

 

35,295

5.7

 

75th Percentile

 

35,870

7.4

NOTES

(see Glossary for ADSCR and LLCR under 'Cover ratios')

1  The unitary charge shown above is based on separately applying the terms & conditions to a typical size deal with a capital cost of £170 million and debt of about £190 million and a rate of return to equity of 12.5 per cent.

2  The sum of the price impacts of each change individually, totalling 8.57 per cent, would be incorrect and greater than the price impact from the base case to the current climate. The reason for a lower result is that increasing the unitary charge, to 'fix' a particular variable, mitigates the impact of other changes.

3  If the unitary charge is held constant, the rate of return to equity falls to 6.55 per cent.

Source: KPMG