2.20 Many of the banks and other funders that finance other PFI projects are now interested in waste PFI. There are two main components to the cost of debt finance for waste PFI projects: the underlying interest rate and the risk margin. The risk margin reflects the complex risks of waste projects and the fact that waste projects do not display the uniformity of other PFI building projects such as hospitals or schools. In addition, all PFI projects have been facing higher risk margins in 2008 compared with previous years because of uncertainties in financial markets (Figure 16). Recent decreases in underlying interest rates should, however, be an offsetting factor in future deals.
2.21 If financing markets recover there may be opportunities for the investors to refinance PFI waste projects on improved terms. As from October 2008, the Treasury expects all PFI contracts that are signed during the current disruption to the credit markets to require up to 70 per cent of refinancing gains to be given to the public sector. The previous normal arrangement was 50 per cent.