1 The Treasury should continue to support authorities in ensuring that value for money is achieved in refinancing. It should continue the steps it has taken to articulate to the PFI market the public sector's criteria for accepting refinancing proposals, particularly those involving changes to termination liabilities. The Treasury should also continue its efforts to identify and disseminate examples of good practice in the treatment of termination liabilities and other refinancing issues.
2 Before accepting a refinancing proposal, an authority must give careful consideration to the impact of the proposals on the future of the project, in particular:
a whether, after investors have withdrawn benefits from the project, there will still be sufficient incentives to perform the required services and sufficient reserves within the project to fund the life cycle maintenance of the project and contingencies;
b the consequences of accepting any proposal to increase termination liabilities, or extend the contract period, particularly given that unforeseen events may arise in the future, such as changes in public service requirements or contractor performance, which could increase the likelihood of early termination of the contract needing to be considered; and
c that, depending on contract terms, receiving the gain over time may create a possible risk that part of the gain might not be received if the contract is terminated early. Decisions on the best basis for receiving the gain should take into account this risk and other aspects of value for money such as the impact on termination liabilities.