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Presented by Charles Lloyd, head of corporate and private finance, HM Treasury

Presented by Charles Lloyd, head of corporate and private finance, HM Treasury

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  • 1. CBI seminar on PPPs Charles Lloyd Head of Corporate and Private Finance HM Treasury 15 July 2009
  • 2. Agenda
    • Recent and current PFI market
    • TIFU
    • The broader PPP landscape
    • Other developments
  • 3. 2008/09 PFI transaction volume sharply down
  • 4. 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
  • 5. 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
  • 6. 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
  • 7. 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
  • 8. 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
  • 9. 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
  • 10. Other developments: PFI/PPP
    • Strong pipeline, but tightening capital budgets
    • Accounting / budgeting changes
    • Considering optimal project support and scrutiny arrangements
  • 11. Other developments
    • Focus on asset and property disposals following OEP report
    • New Shareholder Executive board
    • Infrastructure UK