We were told about 12 completed refinancings with varying results for the public sector
1.29 There is no definitive central database of completed refinancings, though much information is now available centrally and this will be built up and maintained. A key difficulty in attempting to compile a summary of completed refinancings is that in many early PFI contracts the private sector consortium was not contractually obliged to notify the department of a refinancing. From the PUK work, and from other market information, the OGC has been able to gather considerable data about refinancings.
1.30 In our survey, we asked departments whether their projects had been refinanced. We were told of 12 projects that had been refinanced, including three roads, two prisons, a hospital, a school and several other types of project (Figure 7 overleaf).
1.31 Outcomes from these initial refinancings which have been reported to us have varied. In nine of the 12 refinancings departments received a share of the gains with seven receiving at least 25 per cent. These included the Inland Revenue receiving 60 per cent (£8.5m) in respect of the Newcastle Estate and DEFRA receiving 50 per cent on a small refinancing in respect of its Cambridge site. There had been no share of refinancing gains in three projects: the M1-A1 link but the Highways Agency had secured just over 30 per cent of the gains arising in two other projects; Parc (formerly Bridgend) prison, where the Prison Service had no contractual right to share the benefit but had made attempts to negotiate a share; and the Customs and Excise IT infrastructure project (where the department considers the operation of the contract will be improved by the refinancing).
1.32 In only one of the 12 cases had the authority been informed by the contractor of its intention to refinance the project before the contract was let. Contractors generally reported to authorities that they proposed a refinancing close to the time the service came into operation. In eight, two-thirds of the cases, the contractor had informed the authority within 13 months of the service coming into operation. In the other four cases although the intention to refinance was announced at a later date this was still at an early stage in the contract period.
1.33 In the 12 refinancings listed in Figure 7 the public sector, based on departmental information, has secured a total share of refinancing benefits of at least £17 million out of total benefits of about £65 million10. This is, however, only an early indication of more extensive refinancing activity that may emerge over time. As over 500 PFI contracts have now been let, including some 200 where the service is already operational (which in many cases increases the likelihood of a refinancing occurring), there may be considerable scope for further refinancing. In addition, the information on completed refinancings summarised above is based on information from departments. Its degree of completeness is dependent on contractors having informed departments of changes in their financing arrangements and departments identifying correctly when refinancing benefits have arisen.
7 |
| Completed refinancings notified to NAO (in order of completion) |
| Project Name | Contract signature | Service Operational | Intent to refinance notified | Refinancing completed | Share for dept/ Local Authority | ||
1 | Colfox School (DfES) (Note 1) | 11/97 | 09/99 | 03/99 | 06/99 | 25% | £0.4m | Jarvis Workspace FM Ltd, Compass, Research Machines |
2 | Altcourse Prison (Fazakerley) (Prison Service) (Note 2) | 12/95 | 12/97 | 11/98 | 11/99 | 9.3% | £1m | Group 4 Falck, Carillion |
3 | A19/A168 Dishforth-Tyne Tunnel (Highways Agency) | 15/10/96 | 09/98 | 10/99 | 03/01 | 33% | £1.5m | Autolink Concessionnaires (A19) Ltd |
4 | Sheffield New Office Accommodation (ODPM)(Note 1) | 03/99 | 02/01 | pre-contract | 04/01 | The department reports that refinancing gains were built into the original unitary charge before contract letting | Kerkehout Beheer B.V, Heart of the City Ltd, Taylor Woodrow Construction Ltd | |
5 | Parc Prison (Bridgend) (Prison Service) (Note 3) | 01/96 | 11/97 | 05/01 | 05/01 | 0% | £0 | Securicor, Deutsche Bank, Costain, Skanska, WS Atkins |
6 | Newcastle Estates (IR) | 01/08 1st phase 04/00, remainder 09/03 | 09/00 | 06/01 | 60% | £8.5m | Newcastle Estate Partnership Ltd, Amec plc, Interserve | |
7 | IT Infrastructure PFI (IS PFI) (C&E) (Note 4) | 08/99 | 04/00 | 12/00 | 07/01 | 0% | £0 | ICL plc (now Fujitsu) |
8 | M1-A1 Link (Highways Agency) | 26/03/96 | 02/99 | 04/01 | 09/01 | 0% | £0 | Yorkshire Link Ltd |
9 | M40 Denham-Warwick 10/96 (Highways Agency) | 12/98 | 06/01 | 10/01 | 31% | £1.7m | UK Highways plc | |
10 | Cambridge Site (DEFRA) 02/01 | 05/03 | 11/01 | 02/02 | 50% | £0.4m | Kajima Construction Europe (UK) Ltd | |
11 | Calderdale Hospital (DoH) | 07/98 | 04/01 | 11/01 | 05/02 | 30% | £3.6m | Bovis Lend Lease, ISS Mediclean, Bank of Scotland, Société Générale |
12 | Joint Services Command 06/98 and Staff College (MoD) | 09/00 | 02/02 | 06/02 | 30% | £0.4m | Laing Investments, Serco | |
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| Total gains: £17.5m |
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NOTES 1. This is a local authority project that has central government support. 2. The Prison Service received a 9.3% share of the total refinancing benefit but this represented 20% of the refinancing benefit that required its consent. 3. The Prison Service did not have the right to share refinancing gains. Based on an analysis of information provided by the consortium the refinancing gains to the contractor were £1.4 million. 4. The department reports gains for the contractor of £2 million over the course of the contract and that the operation of the contract will be improved. Source: Survey returns from departments | ||||||||
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10 The refinancing benefit to the public sector in the pricing of the Sheffield New Office Accommodation project has not been quantified.