We calculated the percentage gain in relation to capital value which was represented by the refinancing gain in the Norfolk and Norwich project. The public sector gain was then calculated using this percentage, 27 per cent, in conjunction with the figure of £7,137 million.
(£7,137 million x 27% x 30% = £580 million)
We have assumed, for the purpose of these calculations, that those projects which we have identified as viable for refinancing will all go on to refinance. In practice this may not be the case as, for example, some Secondary Market Fundholders (SMFs) may wish to leave a project unrefinanced in order to maintain an investment which offers a high, long term yield which would be attractive to tertiary market investors such as pension companies.
We have excluded projects with a capital value of less than £10 million from the population of projects assessed as viable for refinancing, on the basis that it is unlikely that they will be profitable to refinance on an individual basis. It may, however, be possible that some of these projects will eventually be refinanced as part of a bundle by SMFs.
The estimates do not take account of when the refinancing will take place within the life of a project. A refinancing which takes place towards the end of the life of a project will, ceteris paribus, produce a smaller gain than one which occurs earlier.
In conclusion, these calculations are not a definitive prediction of future refinancing gains that will accrue to the public sector but are designed to aid a better understanding of the potential and likely future gains from refinancing.