CBI seminar on PPPs Charles Lloyd Head of Corporate and Private Finance HM Treasury 15 July 2009

Agenda Recent and current PFI market TIFU The broader PPP landscape Other developments

Recent and current PFI market

TIFU

The broader PPP landscape

Other developments

2008/09 PFI transaction volume sharply down

Current market facts and trends 13 deals, £3.0bn finance so far in 2009/10 Club or single bank deals + EIB Growth in bank capacity, but still fragile TIFU gives sponsors and authorities options Focus on affordability and future VFM

13 deals, £3.0bn finance so far in 2009/10

Club or single bank deals + EIB

Growth in bank capacity, but still fragile

TIFU gives sponsors and authorities options

Focus on affordability and future VFM

Treasury position Encouraging use of TIFU in appropriate circumstances Seeking to reduce burdens on funders at early stages in procurements Greater flexibility on capital contributions Encouraging capital market solutions Not pursuing material changes in SOPC 4 risk allocation

Encouraging use of TIFU in appropriate circumstances

Seeking to reduce burdens on funders at early stages in procurements

Greater flexibility on capital contributions

Encouraging capital market solutions

Not pursuing material changes in SOPC 4 risk allocation

Issues and responses Liquidity Affordability Resources TIFU EIB TIFU Soft mini perms Capital contributions Credit crunch guidance Capital market solutions Guarantees / Authority co-lending Material changes to SOPC4

TIFU

EIB

TIFU

Soft mini perms

Capital contributions

Credit crunch guidance

Capital market solutions

Guarantees / Authority co-lending

Material changes to SOPC4

TIFU A potential source of liquidity that authorities, sponsors and advisers should consider for projects facing finance-related delays Intention is not to replace banks/capital markets Expect private sector and EIB to continue to provide the majority of finance Temporary and reversible solution A cross-department centralised approach

A potential source of liquidity that authorities, sponsors and advisers should consider for projects facing finance-related delays

Intention is not to replace banks/capital markets

Expect private sector and EIB to continue to provide the majority of finance

Temporary and reversible solution

A cross-department centralised approach

TIFU lending On a market basis, generally alongside other funders: Where a project cannot secure sufficient finance to reach close on a timely basis Where proposed private funding is not representative of terms generally available in the market To prevent project drift Affordability issues alone will not be sufficient grounds for Treasury to lend to a project

On a market basis, generally alongside other funders:

Where a project cannot secure sufficient finance to reach close on a timely basis

Where proposed private funding is not representative of terms generally available in the market

To prevent project drift

Broader PPP landscape Infrastructure (PFI) Infrastructure (non-PFI) ICT Shared services / out-sourcing Public service operating contracts 20-40% of complex procurement 60-80% of complex procurement Market standard model Yes Range of models and delivery mechanisms Growing standardisation No No Standard contract? Yes Variable range of contracts Yes - OGC and PUK No Some sectors only Contract terms mandated? Yes No No No No Gap Guidance on contract selection; consult on need for new models Explore need for standard models, contract terms and other support

Other developments: PFI/PPP Strong pipeline, but tightening capital budgets Accounting / budgeting changes Considering optimal project support and scrutiny arrangements

Strong pipeline, but tightening capital budgets

Accounting / budgeting changes

Considering optimal project support and scrutiny arrangements

Other developments Focus on asset and property disposals following OEP report New Shareholder Executive board Infrastructure UK

Focus on asset and property disposals following OEP report

New Shareholder Executive board

Infrastructure UK