■ The Treasury's guidance to authorities (but not part of the code) said that the discount rate for calculating the refinancing gain is the consortium shareholders' expected rate of return at the time the contract was let – in this case 21 per cent in nominal terms.
■ THC Dartford was not prepared to calculate the refinancing gain on this basis. It considered a rate of around 10 per cent nominal should be used in line with the level of returns which might be sought by a pension fund if it bought a shareholding in the project from the initial shareholders.
■ The Treasury and the Department agreed to compromise over the discount rate to be used in the calculation. They considered 21 per cent nominal would have been an unusually high discount rate. The 21 per cent nominal return expected by the initial shareholders at contract letting had reflected the additional risks of what was the first PFI hospital contract.
■ The Treasury and the Department negotiated with THC Dartford that a rate of 15 per cent nominal should be used. This was in line with the rate of return expected at contract letting by shareholders in more mature PFI hospital projects.
■ The Trust's advisers, Ernst & Young, estimate that, had a discount rate of 21 per cent nominal been used in line with the Treasury's guidance, this would have increased the refinancing gain by £4.6 million. Based on the 30 per cent share to be given to authorities in accordance with the voluntary code the Trust would have been due around £1.4 million of this increased gain.
■ The Treasury and the Department did not think they could gain THC Dartford's agreement to give up this higher amount of refinancing gains. The Treasury and the Department believe that the negotiated solution still gave the Trust a significant refinancing benefit which it could not have been certain of receiving without the code.