PFI skewed public sector deals
Off-balance sheet structures have forced some deals to be structured in odd ways, says PwC, as prospect of change to rules comes as 'a relief'.
Private finance initiative deals moving onto government’s books will remove
the need to distort deals in order to have them off the books, PwC says.
The firm, which did a study into PFI deals, said that it is unquestionable
that some prevalent features of project structuring have been attributable to
securing off-balance sheet classification.
According to PwC, a number of projects have had a degree of demand risk
injected into them, when this does not seem to make sense in relation to the
underlying drivers of demand in the project.
‘Commonsense has steadily reasserted itself in this area with a number of
sectors migrating from demand-based to availability-based payment mechanisms
over time, roads being the prime example. Artificial structuring of projects is
not, however, something characteristic only of the early years of PFI. Many
people currently active in the market are aware of examples where aspects of
project structuring are back-solved from the intended accounting treatment,
notwithstanding official admonitions to the contrary,’ the study says.
PwC says the removal of this pressure ‘will, frankly, come as a relief’.
Read
PwC’s report into PFI deals here.