Over £4.6bn of transport PFIs move forward

The UK government has green-lighted three highways maintenance project finance initiative projects in Sheffield, Hounslow and the Isle of Wight. It has also cleared a tram project in Nottingham, which has announced its preferred bidder today, after achieving savings of 21% on the four deals.

The UK government has given the go-ahead to over £4.6 billion (€5.2 billion; $7.4 billion) of project finance initiative (PFI) transport projects, after cutting their costs by £209 million, the Department for Transport (DfT) announced late last week.
 
“The Department has been working closely with the [local] authorities involved to ensure these projects are affordable. I am pleased they have been able to rise to the challenge and have identified savings of 21 percent from the original estimated costs,” transport minister Norman Baker said in a statement.
 
As a result, three highways maintenance PFIs in Sheffield, Hounslow and the Isle of Wight and a tram project in Nottingham have been allowed to proceed with their procurement. PFI is the UK's standardised process for procuring public-private partnerships.
 
Nottingham City Council wasted no time after the government’s clearance, announcing a preferred bidder today for the construction and operation of two new lines to extend the city’s tram network. It will now negotiate with a consortium of VINCI, Alstom, Keolis, Trent Barton and infrastructure funds Meridiam and Infravia with a view to awarding the contract in the late summer. 
 
The city authorities did not reveal the final price of the project, which originally had capex in the region of £500 million. 
 
On the highways front, Sheffield’s £2 billion PFI project to maintain 1,200 miles of carriageways and 2,000 miles of footways and streetlights is expecting to start work in August, following the DfT’s approval. Amey and CarrillionMouchel are the two consortia in the race to win the contract.
 
The Isle of Wight’s £1.2 billion scheme to refurbish and maintain 499 miles of roads, 477 miles of footways and some 12,000 streetlights and bridges should move forward next, with work expected to start in 2012. Three consortia are said to be competing for the contract.
 
The £1.4 billion London Borough of Hounslow’s project to revitalise and maintain 458 miles of pavements and 259 miles of roads is the most delayed in procurement, with a winner expected by summer of 2012 and work to begin in 2013. Consortia of Skanska/John Laing, VINCI/Ringway and Balfour Beatty have already submitted proposals for the PFI deal.
 
The government’s decision to proceed with these four PFI projects might surprise some, considering that PFI has been under fire by members of parliament and government figures for the last couple of months. In January, cabinet office minister Francis Maude labelled PFI as “ghastly” and accused the private sector of “laughing all the way to the bank” on some of these deals.
 
But industry veterans like Gershon Cohen, head of global project finance at Lloyds Banking Group, and Anthony Rabin, Balfour Beatty’s deputy chief executive, had remained unmoved by the controversy surrounding PFI, expressing confidence in the future of the procurement process. 
 
It seems the government is proving them right. Or as Mark Twain might have said it: “The reports of PFI’s death are greatly exaggerated”.