1 The single Design Build Finance Operate project for the M25 will widen two sections (38 miles). The 30-year cost includes maintaining the Dartford crossings and operating 250 miles of existing motorway. This cost increased by 23 per cent from a net present value of £2,756 million before the banking crisis, to £3,400 million by the time the financing was complete in May 2009.
2 We estimate that the largest component of the increase faced by the Highways Agency was an increase, arising from debt finance costs, of around 15 per cent compared to market terms available in 2007. This finding is extrapolated from our benchmarking model for typical cost changes on smaller transactions (see Appendix Two).
3 Larger and more complex projects were already facing higher bank costs in March 2008 when the Future Strategic Tanker Aircraft (FSTA) project closed early in the credit crisis (see timeline in Figure 7). The M25 financing terms, when applied to the KPMG model, show a cost 6 per cent greater than that derived when applying the FSTA financing terms. This is similar to the lower end of increases experienced since October 2008 on other PFI projects.
4 We will be reporting separately on the value for money of the M25 project.