In a written ministerial statement presented to the House of Commons this morning (March 3), the chief secretary to the treasury, Yvette Cooper, revealed that waste PFI projects would be one of the beneficiaries of the lending that aims to safeguard £13 billion of public investment in procurement in total.
This action will ensure that crucial and valuable public investment will not be disrupted by problems in the financial markets
Yvette Cooper, chief secretary to the Treasury
It is thought likely that the new fund could help to push the delayed Greater Manchester waste PFI project towards its financial close, which is expected this month (see letsrecycle.com story), while more than 20 other waste PFI projects are currently in procurement or could potentially enter procurement shortly.
Ms Cooper said: “I am announcing Government action today to ensure vital PFI infrastructure projects will go forward as planned despite current financial market conditions, so they can support jobs and the economy.”
“This action will ensure that crucial and valuable public investment will not be disrupted by problems in the financial markets,” she explained, adding that “it will also avoid the significant delays which would be entailed by switching these projects to alternative procurement approaches.”
Plans for the government to provide public money for PFI projects were first mooted by Prime Minister Gordon Brown last month (see letsrecycle.com story).
In today's statement, Ms Cooper said that the lending will involve the Treasury taking money from across the Government – initially from unallocated funds and Departmental underspends – and loaning it to PFI projects that had been unable to raise sufficient debt finance on “acceptable terms”.
Confirming that, if necessary, the government could provide the full amount of senior debt needed by a project, she did however stress that “equity investors will continue to bear the primary risk in these projects and, where available, private sector debt will continue to be provided.”
Procurement
While details of exactly which PFI-funded waste treatment projects could benefit from the loans have not yet been revealed, Ms Cooper said that all PFI deals that were in procurement were eligible for the lending, as well as those “intending to go to the market soon”, as long as they were approved by the Treasury.
There are currently 15 PFI-funded waste treatment projects in procurement; while a further 11 schemes have had their expression of interest for PFI funding approved by Defra.
It is believed that the much-delayed Greater Manchester PFI project could be one of the first deals to benefit from the newly available loans.
However, speaking to letsrecycle.com today, a spokeswoman for the Greater Manchester Waste Disposal Authority (GMWDA) would not comment on links between the project and the fund, and would only confirm that “GMWDA is continuing to work collaboratively with Viridor-Laing and the funders towards achieving financial close at the earliest opportunity.”
Explaining just how the lending would work, Ms Cooper said: “The Treasury will use professional lending skills, and intends to lend to projects only where appropriate funding is not available from the market. It will be a temporary intervention.
“As with normal commercial lending these loans will bear interest and will be repaid over the life of the project. The Treasury envisages, however, selling the loans it makes prior to their maturity when favourable market conditions return,” she added.
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