1.7 In total over 700 PFI contracts have been let. The 20 Code refinancings are from a population of approximately 500 early PFI contracts let before the Code came into operation (Figure 6). However, the characteristics of the majority of these projects may not give the public sector the prospect of benefiting from refinancing. For example, almost half are small projects (less than £10 million in capital value). For these small projects, the cost of ending their current financing arrangements in terms of the external legal and financial advisor costs along with the internal resources needed to arrange new finance, may exceed the potential refinancing gain and thereby make the refinancing unattractive. There are also some PFI projects that are excluded from having to share any refinancing gain with the public sector as the finance is not specific to the PFI project (Figure 10, page 18). This leaves around 150 early PFI projects which could potentially be suitable for refinancing. There may, however, be costs involved in unwinding the existing financing arrangements of some of these projects which could make refinancing uneconomic.12 The balance of whether the opportunities for gains, for example by being able to borrow for longer periods at lower rates of interest, outweigh the penalty costs of ending existing arrangements will vary from case to case.
4 | Sources of refinancing gains to the Government up to February 2006 | |||||||||||||||||||||
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Refinancings taking place before the Code | £23 million | |||||||||||||||||||||
Refinancings as part of the voluntary sharing arrangement under the Code | £72 million | |||||||||||||||||||||
Refinancings since the Code with a contractual sharing mechanism | £42 million | |||||||||||||||||||||
Total | £137 million | |||||||||||||||||||||
Source: National Audit Office Survey and PUK database of PFI projects | ||||||||||||||||||||||
5 | Summary of the public sector's refinancing gains from the Code's voluntary sharing arrangements | |||||||||||||||||||||
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Project | Refinancing Gain to the public sector (£m) | |||||||||||||||||||||
Norfolk & Norwich Hospital | 33.9 | |||||||||||||||||||||
Bromley Hospital | 14.2 | |||||||||||||||||||||
Darent Valley Hospital | 11.7 | |||||||||||||||||||||
Scotland and Wales (one project each) | 5.2 | |||||||||||||||||||||
8 other projects (excluding schools) | 4.3 | |||||||||||||||||||||
7 schools | 2.2 | |||||||||||||||||||||
Total Refinancing Gain to public sector | 71.5 | |||||||||||||||||||||
Source: National Audit Office Survey and PUK database of PFI projects | ||||||||||||||||||||||
Full details of all refinancings can be found in Appendix 9.
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12 These costs could be for breaking fixed interest arrangements on bank loans or penalty payments for the early repayment of bond finance.