PFI waste scheme forces ten-fold rise in borrowing

18 Jun 09
Manchester’s waste disposal authority is set for a ten-fold hike in its borrowing levels to support its £4.7bn Private Finance Initiative scheme.
By Tash Shifrin

Manchester’s waste disposal authority is set for a ten-fold hike in its borrowing levels to support its £4.7bn Private Finance Initiative scheme.

The huge deal signed in April was the first PFI project to secure senior debt from the Treasury’s infrastructure finance unit, with a £120m loan. Tifu was set up to provide loans for PFI schemes that are struggling to secure private finance because of the credit crunch.

Greater Manchester Waste Disposal Authority also took the unprecedented step of becoming a senior lender to its own scheme, providing a £35m loan, alongside a £68m capital contribution.

GMWDA board meeting papers reveal the dramatic effect of the PFI contract on the authority’s borrowing levels.

A report on treasury management strategy by treasurer and deputy clerk John Bland to GMWDA’s June 19 annual general meeting said the balance sheet for 2007/08 recorded £14.5m long-term borrowing.

But this would grow over the next three years, due to the capital contribution and loan plus the money required to buy land for the PFI site and £2m in 2009/10 for ‘an expanded capital programme’ linked to landfill ‘after care’. These factors ‘taken together will increase borrowing levels about ten-fold’, the report said.

The report proposed a £129m  operational limit for external debt by 2011/12, with an authorised limit of £134m.

The £68m capital contribution was required ‘to cover the increased costs of the project’, including items such as electrical supply and rail wagons, the papers showed.

Following his work on the complex deal, Bland has been appointed to join the Treasury’s project review group, which reviews the progress of PFI schemes nationally.

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