the use of PPPs Charles Lloyd HM Treasury 12 April 2010 2 Agenda Effect of the credit crisis on UK PPPs The UK response Impact and market developments Effect of the credit crisis on UK P ID: 846138
Download Pdf The PPT/PDF document "The financial crisis and" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
1 The financial crisis and the use of P
The financial crisis and the use of PPPs Charles Lloyd HM Treasury 12 April 2010 2 Agenda ⢠Effect of the credit crisis on UK PPPs ⢠The UK response ⢠Impact and
2 market developments Effect of the c
market developments Effect of the credit crisis on UK PPPs 4 Substantial reduction in PPP transactions in 2008/09 5 2008/09 market developments ⢠Closure of the wrapp
3 ed bond market ⢠Bank withdrawal;
ed bond market ⢠Bank withdrawal; no syndication; club deals only ⢠Higher margins and fees ⢠Large projects âblockingâ the market ⢠Increased EIB activity Lending from m
4 arket sources unlikely to be sufficient
arket sources unlikely to be sufficient to deliver the 2009 - 10 PFI pipeline on a timely basis The UK response 7 Approaches considered ⢠Unwrapped bonds ⢠Short term financing (
5 mini - perms) ⢠Government lending
mini - perms) ⢠Government lending ⢠Re - procurement on a conventional basis Conclusion that direct lending by Treasury was the preferred option in the UK context; TIFU created in Ma
6 rch 2009 8 8 Market issues and Gov
rch 2009 8 8 Market issues and Government responses Liquidity Affordability Resources ï¼ TIFU ï¼ EIB ï¼ TIFU ï¼ Soft mini perms ï¼ Capital contributions
7 ï¼ Credit crunch guidance ï¼
ï¼ Credit crunch guidance ï¼ Capital market solutions ï Guarantees / Authority co - lending ï Material changes to SOPC4 9 TIFU ⢠A potential source of liquidity
8 for all PFI projects facing finance -
for all PFI projects facing finance - related delays ⢠Not intended to replace banks/capital markets ⢠Expect private sector and EIB to continue to provide the majority of finance â
9 ¢ A professional lending capability in
¢ A professional lending capability in Treasury ⢠Temporary and reversible solution ⢠A cross - department centralised approach 10 Circumstances in which TIFU lending available
10 ⢠Where a project cannot secure suffi
⢠Where a project cannot secure sufficient finance to reach close on a timely basis ⢠Where funding offered to a project is âoff - marketâ Affordability issues alone are not suff
11 icient grounds for Treasury to lend to
icient grounds for Treasury to lend to a project Impact and market developments 12 12 Limited TIFU lending ⢠TIFU has lent only once: £120m to the Manchester Waste PFI projec
12 t in April 2009 ⢠It has also had a
t in April 2009 ⢠It has also had a âshadowâ role on other projects: ⢠Alongside the mandated funding group ⢠Supporting the funding competition process ⢠As a safety net in
13 case of funder withdrawal 13 B
case of funder withdrawal 13 But substantial market recovery in 2009/10: 14 14 And significantly more confidence now than a year ago: ⢠32 deals closed in 2009 - 10; c
14 apital value £4.6bn ⢠Club or single
apital value £4.6bn ⢠Club or single bank deals + EIB ⢠Some banks have returned to the market and ticket sizes have increased ⢠TIFU has given sponsors and authorities confidence a