On 11 December 2006, the Committee of Public Accounts held a hearing based on the Comptroller & Auditor General's report, Update on PFI debt refinancing and the PFI equity market. During the hearing, the Committee raised the issue highlighted in the C&AG's report that 16 out of 36 projects had not provided information requested by the NAO on behalf of the Committee in respect of internal rates of return before and after the projects' refinancing, which would show the benefits investors had derived from the refinancings.
The Committee asked for a list of the projects which had failed to provide this information and their value, and also asked the NAO to continue to seek the missing information in the aftermath of the hearing. An update of the situation as at 28 February 2007 is provided in Figure 1. The National Audit Office will be placing this information, and any further information supplied by the projects after 28 February 2007, on its website www.nao.org.uk
Figure 1
POSITION AT 28 FEBRUARY 2007 ON PROJECTS WHICH HAD PREVIOUSLY NOT SUPPLIED IRR INFORMATION REQUESTED BY THE COMMITTEE OF PUBLIC ACCOUNTS
Information now returned (see Figure 2 below)
| Project Name | Value of |
| |
1. | M1-A1 Link Road (Lofthouse to Bramham) | 210 |
| No return |
2. | A30/A35 Exeter to Bere Regis Design Build Finance and Operate (DBFO) contract | 76 |
| No return |
3. | A50/A564 Stoke-Derby Link DBFO contract | 21 |
| No return |
4. | North Wiltshire District Council- Property Rationalisation | 10 |
| Returned incomplete information |
No return to date but the authority has said that it will be disclosing information
| Project Name | Value of |
| Previous response provided at publication of C&AG's Report |
5. | Sussex Weald and Downs NHS Trust: Graylingwell Hospital reprovision, Chichester | 27 |
| No return |
6. | A19 Dishforth to Tyne Tunnel DBFO contract | 29 |
| No return |
7. | M40 Denham to Warwick | 65 |
| No return |
No return but it is unlikely that the authority would have had the information since the private sector did not share gains with the authority
| Project Name | Value of |
| |
8. | Second Severn Crossing | 331' |
| No information provided by the Highways Agency on the grounds that, due to the nature of the transaction (note 1), it had been agreed there was no gain to be shared with the government and it was not able to calculate the private sector gains or the IRR information requested |
9. | A69 Carlisle to Newcastle DBFO contract | 9 |
| No return |
10. | Hillingdon-Barnhill School | 27 |
| No return |
Note 1: Following a European Court of Justice ruling imposing VAT on road tolls affecting the consortium's ability to service its debt, it was agreed the project would be refinanced with no share to the government.
Information has been returned but it appears incorrect and is being investigated further by the NAO
| Project Name | Value of |
| |
11 | Colfox School | 13 |
| No return |
12. | Central Scotland Family Quarters, Bannockburn | 30 |
| No return |
School projects where it has not been possible to obtain information from either the former investor (Jarvis) or the current investor SMIF but where the NAO would have expected the authority to have the information in order to check its share of the refinancing gain
| Project Name | Value of |
| Previous response provided at publication of C&AG's Report |
13. | Cardinal Heenan (VA) School | 8 |
| No return |
14. | Haringey Schools | 63 |
| No return |
15. | Brent Jews Free School | 9 |
| Returned incomplete information |
16. | Bridlington Schools | 26 |
| Returned incomplete information |
Figure 2
FURTHER INFORMATION ON IRRS SUPPLIED SINCE PUBLICATION OF C&AG'S REPORT
Project | IRR at contract award | IRR just before refinancing | IRR just after refinancing |
M1-A1 Link Road (Lofthouse to Bramham) | 17% | 25% | 33% |
North Wiltshire District Council property rationalisation | 13% | 13% | Note 1 |
A30/A35 Exeter to Bere Regis DBFO | 16% | 17% | 23% |
A50/A564 Stoke-Derby Link DBFO | 13% | 23% | 27% |
Note 1: This was a small early PFI scheme (capital value £10 million, share capital from Jarvisof £125,000 and a refinancing gain of only £0.3 million). Despite these small numbers the project has reported an IRR after refinancing of 662%. Whilst arithmetically correct, this is a highly unusual situation as this small value refinancing occurred early during construction so that subordinated debt of £1.1 million which Jarvis was due to lend was not drawn down and outstanding for a full year. This produced a very big effect on the IRR which is very sensitive to the amount and timing of shareholder loans. Had the subordinated debt been outstanding for a full year the IRR after refinancing would have reduced to around 80%. For these reasons the IRR is not comparable to data in Figure 2 or Appendix 9 of the C&AG's report.
In addition, the MOD Joint Services Command and Staff College has advised us that, based on information it has received from the private sector parties to the deal, the IRR just after refinancing should be 52% and not 31% as the College had disclosed previously prior to the publication of the C&AG's report.