The Private Finance Initiative (PFI)

Additional PFI guidance

Section 3 - Finance Guidance

3.1 Application Note: Interest and Inflation Risk
PDF file of Application note - interest-rate and inflation risks in PFI contracts (131KB)
This Application note has been designed to help procuring authorities understand and evaluate cost effective strategies for managing interest rate and inflation risks in PFI transactions.

3.2 PDF file of Guidance Note: The Use of Internal Rates of Return in PFI Contracts (47KB)
This guidance note, previously published as Annex 2 of SoPC Version 3, provides guidance on calculation and use of Internal Rates of Return (IRR) in PFI contracts.

3.3 Preferred Bidder Debt Funding Competitions
3.3.1 PDF file of Preferred Bidder Debt Funding Competitions - letter (144KB)
3.3.2 PDF file of Preferred Bidder Debt Funding Competitions - draft outline guidance for feedback (68KB)
The public sector consultation of Preferred Bidder Debt Funding Competitions has concluded, and the guidance has been published in draft-outline for wider feedback.

3.4 Refinancing
3.4.1 PDF file of Refinancing of Early PFI Transactions - Code of Conduct
This Code of Conduct sets out the basis upon which individual Authorities will approach the refinancing by private sector contractors of early PFI transactions. It is a voluntary Code to enable private sector contractors to share refinancing gain with the public sector on a consistent and equitable basis.
3.4.2 PDF file of Guidance Note: Calculation of the Authority´s Share of a Refinancing Gain (51KB)
This guidance note, previously published as Annex 1 of SoPC Version 3, is intended to assist Authorities and their financial advisers in calculating Refinancing Gains.
3.4.3 PDF file of Covering Note: Value for Money in Refinancings (215KB)
3.4.4 PDF file of Application Note:Value for Money in Refinancings (124KB)
The Application note interprets existing guidance in order to assist authorities in determining value for money when approving refinancing requests. This includes guidance on maximum levels of debt and increases in termination liabilities.

3.5 SPENS
3.5.1 PDF file of Guidance on application of the Spens clause to PFI transactions- covering letter (23KB)
3.5.2 PDF file of Guidance on application of the Spens clause to PFI transaction (32KB)
Government has previously expressed its concern that the Spens formula, which applies to listed bonds in the UK, creates an extra cost of termination for a PFI project. To address this concern Treasury will now require all PFI contracts funded through the capital markets to contain a modified Spens clause. The above guidance has been issued to assist procuring authorities determine the most appropriate form of modified Spens to be applied.

3.6 Credit Guarantee Finance
Credit guarantee finance technical note and draft documentation
Following the publication of PFI: Meeting the Investment Challenge in July 2003, HM Treasury published a Technical Note on the Credit Guarantee Finance scheme and draft documentation for the CGF programme, prepared for HM Treasury by Linklaters.