Railtrack risk for future PFI deals

The warning came as the Treasury prepared to launch a charm offensive to sell the benefits of privately funded hospitals, schools, roads and prisons.

But the warnings could cast a shadow over major public-private infrastructure projects such as the controversial plans for London Underground.

Speaking at the conference in Dublin, Tim Stone, KPMG’s head of PFI, said: ‘In the long run there is no reason why Railtrack should make any difference to PFIs and PPPs if the government handles it right.’

But he said the circumstances around the Railtrack collapse and government treatment of shareholders had caused alarm. Investors and companies supplying services under PPPs needed reassurance, he said.

Nigel Middleton, PwC’s head of PPP advisory services, warned equity funds were already having problems raising money for projects.

‘There is a risk that in the light of Railtrack they will now even more take the view that this is not as safe an investment as they thought,’ he warned.

But Paul Boateng, financial secretary to the Treasury, told the conference the greater use of PPPs for rail projects was ‘an important part of the government’s proposed solution to the Railtrack problem’.

He said PPPs, with their fixed contracts and clearly allocated risks, were ‘quite unlike’ the unique situation at Railtrack.

‘The private finance initiative and public-private partnerships are absolutely essential tools for modernising public servies,’ he said.


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