Government “more optimistic” about waste PFI prospects

Speaking at a City & Financial 'Bridging the PPP/PFI funding gap' event, held in London last week, the head of the Treasury's Infrastructure Finance Unit (TIFU), Andrew Rose, said there was evidence that banks were lending money for deals and that they were closing.

“There's a real positive sense of deals that have just closed or we are in the process of closing,” he explained, while the head of public private partnerships (PPP) at the Treasury, Charles Lloyd, claimed that there had been “some recent increases in banking activity”.

Mr Rose highlighted the impact that signing both the £3.8 billion Greater Manchester waste deal last month (see letsrecycle.com story) and the M25 widening seemed to have had on PFI activity.

“There were two significant transactions that affected the pipeline. I think we argue that they blocked the line because they took so much focus of the bankers' attention. If that was a blocker then that blocker is out of the way,” he said.

The signing of the Greater Manchester deal involved a £120 million loan from Mr Roses' TIFU (see letsrecycle.com story).

Optimistic

However, he added that: “The view we have at the moment is its unlikely the lending we have now from market sources will allow the 2009/10 PFI pipeline to close on a timely basis – they will close though.”

And, he explained that “people have told us there are about half the level of market resources there were compared to at its peak”.

Defra

At the same event, Melville Haggard, head of the waste infrastructure development programme (WIDP) at Defra, revealed that, from a meeting the department had held with the banking sector earlier this year, the message had been “very positive” about waste PFI.

With 36 waste PFI deals in procurement, and six set to be advertised for tender in the next six months, he claimed there was a “strong and healthy” project pipeline for the sector.

He said: “I think what we have seen in the weeks since that meeting is clubs of banks coming forward with the procurements that are coming through.”

There is currently just one waste PFI in procurement to have reached preferred bidder stage – with VT Group chosen for Wakefield's £700 million project in June 2008 (see letsrecycle.com story).

But, though the deal was expected to reach financial close last summer, it remains unsigned, and earlier this month, VT Group revealed that looking to secure a loan from the TIFU was “an option” (see letsrecycle.com story).

At the event, Mr Haggard also explained that banks were increasingly looking at “interaction” between the waste and energy sectors, explaining that “a very important part of the commercial agenda revolves around the combustion agenda”.