2.14 After the initial research, the OGC undertook extensive further work to enhance its understanding of refinancing and to develop appropriate new refinancing arrangements that would be acceptable to the private sector. This would require bringing about a major shift in the market towards accepting the 50/50 sharing of refinancing benefits.
2.15 With assistance from PUK and Deutsche Bank, the OGC continued to research refinancing. This included such complex topics as what constitutes a refinancing and how refinancing gains are measured. These were important issues, as there are many different types of refinancing and many possible ways of computing the gains arising from a refinancing. The OGC was concerned that any new provisions should ensure that the benefits which the private sector would be required to share with the public sector would be equitable and also not jeopardise the value for money of the deal for the public sector. The OGC then considered how the guidance and proposed new contract terms should be formulated and what the private sector's attitude to new refinancing arrangements would be. This work continued through the first half of 2001. In September 2001, the OGC was able to write to Accounting Officers setting out its proposed approach to settling all refinancing issues in a comprehensive fashion. Drafts of new guidance, including proposed new contract terms based on 50/50 sharing of refinancing gains, were then made available to departments in autumn 2001.
2.16 The OGC then embarked on extensive consultation with departments, the NAO and private sector contractors and financiers. A number of further complex issues came to light that had to be considered and appropriate amendments to the guidance were drafted and negotiated with departments and the private sector.
2.17 This included, in autumn 2001, PUK being commissioned by OGC to prepare a report on refinancing of past deals. This informed the discussions with departments and the private sector and underpinned the OGC's conclusion that a code of practice on past deals should be introduced. This report, which incorporated data on how over 100 existing PFI contracts had approached refinancing, took several months to develop and was completed in early 2002.
2.18 By early 2002, the OGC considered that it had largely secured private sector agreement to the principle of 50/50 sharing of refinancing gains. However, further complex technical issues emerged in spring 2002 in the final consultations. These needed to be resolved in finalising the contract terms and the related guidance.