Estimates were calculated for four different scenarios
Scenario 1 | There will be no further refinancings and hence no further gains. |
The refinancings which go ahead will not involve the increase of termination liabilities. | |
Projects will refinance with the same average gain in relation to capital value that has been seen thus far since the introduction of Code. | |
Projects will refinance with the same kind of gain, in relation to capital value, that was seen in the refinancing of the Norfolk And Norwich PFI Hospital. |
The calculation of estimates for scenarios 2-4 relied on the same basic methodology; isolating the body of projects which were felt to be viable for future refinancing under the Code and identifying their capital value. The capital value of the projects was felt to be an important part of the calculation as, ceteris paribus, the larger the capital value of a project the larger the refinancing gain produced from it might be.
To identify the viable projects, the PUK database of all PFI projects was taken as a population and using information held on the database, in conjunction with information gathered as part of NAO refinancing surveys conducted in 2002 and 2004, projects were excluded on the following basis;
Total population of PFI projects at July 2005 held on PUK database | 688 |
Less: Projects signed after the code was introduced, and therefore not falling under the voluntary code. | (167) |
Less: Remaining projects which are bond, part bond or corporately financed, and as such unlikely to refinance (bond) or exempt from gain sharing (corporate). | (27) |
Less: Remaining projects which have been refinanced already. | (42)27 |
Less: Remaining projects with a capital value of less than £10m, and as such unlikely to be profitable to refinance on an individual basis. | (230) |
Less: Remaining projects with a contractual sharing mechanism, and hence not falling under the Code. | (64) |
Those projects thought to be viable for refinancing | 158 |
After these exclusions a body of 158 projects remained, with a total capital value of £7 billion. This formed the basis of the calculation for the scenario 2-4 estimates.
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27 Figure available from PUK's database listing refinanced projects at the time of the analysis in July 2005.