CBI seminar on PPPs

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

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CBI seminar on PPPs

  1. 1. CBI seminar on PPPs Charles Lloyd Head of Corporate and Private Finance HM Treasury 15 July 2009
  2. 2. Agenda <ul><li>Recent and current PFI market </li></ul><ul><li>TIFU </li></ul><ul><li>The broader PPP landscape </li></ul><ul><li>Other developments </li></ul>
  3. 3. 2008/09 PFI transaction volume sharply down
  4. 4. Current market facts and trends <ul><li>13 deals, £3.0bn finance so far in 2009/10 </li></ul><ul><li>Club or single bank deals + EIB </li></ul><ul><li>Growth in bank capacity, but still fragile </li></ul><ul><li>TIFU gives sponsors and authorities options </li></ul><ul><li>Focus on affordability and future VFM </li></ul>
  5. 5. Treasury position <ul><li>Encouraging use of TIFU in appropriate circumstances </li></ul><ul><li>Seeking to reduce burdens on funders at early stages in procurements </li></ul><ul><li>Greater flexibility on capital contributions </li></ul><ul><li>Encouraging capital market solutions </li></ul><ul><li>Not pursuing material changes in SOPC 4 risk allocation </li></ul>
  6. 6. Issues and responses Liquidity Affordability Resources <ul><li>TIFU </li></ul><ul><li>EIB </li></ul><ul><li>TIFU </li></ul><ul><li>Soft mini perms </li></ul><ul><li>Capital contributions </li></ul><ul><li>Credit crunch guidance </li></ul><ul><li>Capital market solutions </li></ul><ul><li>Guarantees / Authority co-lending </li></ul><ul><li>Material changes to SOPC4 </li></ul>
  7. 7. TIFU <ul><li>A potential source of liquidity that authorities, sponsors and advisers should consider for projects facing finance-related delays </li></ul><ul><li>Intention is not to replace banks/capital markets </li></ul><ul><li>Expect private sector and EIB to continue to provide the majority of finance </li></ul><ul><li>Temporary and reversible solution </li></ul><ul><li>A cross-department centralised approach </li></ul>
  8. 8. TIFU lending <ul><li>On a market basis, generally alongside other funders: </li></ul><ul><li>Where a project cannot secure sufficient finance to reach close on a timely basis </li></ul><ul><li>Where proposed private funding is not representative of terms generally available in the market </li></ul><ul><li>To prevent project drift </li></ul>Affordability issues alone will not be sufficient grounds for Treasury to lend to a project
  9. 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. 10. Other developments: PFI/PPP <ul><li>Strong pipeline, but tightening capital budgets </li></ul><ul><li>Accounting / budgeting changes </li></ul><ul><li>Considering optimal project support and scrutiny arrangements </li></ul>
  11. 11. Other developments <ul><li>Focus on asset and property disposals following OEP report </li></ul><ul><li>New Shareholder Executive board </li></ul><ul><li>Infrastructure UK </li></ul>

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