The National Audit Office report revealed that Carillion and Group 4, its partner in the Fazakerley Prison scheme, have almost doubled expected profit by refinancing their debts on the scheme.
However, Carillion executive director John Sharples said: “There were no prior discussions with the Treasury about sharing the benefit we made on refinancing at Fazakerley.
“And while it is inevitable that the Treasury expects to share in profits made in refinancing projects, the opportunities for upside benefits through refinancing are not as significant as they were for early PFI schemes. Banks are more confident now that we can manage the construction risk.”
Refinancing is a common practice in the PFI. It involves paying off money advanced for a scheme by borrowing money from another source at a lower rate of interest.
By restructuring the debt on Fazakerley, the two companies made £30.6m on the project instead of £17.5m.
The NAO report has led to calls within government for contractors that make large profits to be made to return some to the Treasury.
Labour MP Alan Williams, a member of the commons Public Accounts Committee, described the gain made at Fazakerley as “unbelievable”. He said the government should ensure the public sector benefited from similar deals in the future.
However, an investment banker involved in financing PFI schemes echoed Sharples’ views. He said: “Fazakerley was a very early PFI. Banks are not as nervous about financing PFI now as they were then. The PFI market today is much tighter.”
The NAO report stated that refinancing along the lines of the Fazakerley project cast doubt on the claim that PFI schemes gave the government and the public value for money. Jeremy Colman, head of PFI at the NAO said: “If someone makes a killing, people are bound to say that the original deal must have been poor value for money.”