THE FINANCIAL STRUCTURE OF PRIVATE FINANCE INITIATIVE PROJECTS

Over the past years PFI has become a key approach to public –private partnership in the UK. Unlike other forms of co-operation between the public and the private sector, PFI involves the investment of private capital in projects, which provide services to the public. This paper focuses on the financial structure of the PFI schemes and explores the financing options available to PFI participants. Based on 48 elite interviews with senior representatives from leading UK international companies, we identify the currently predominant form of finance through senior and subordinated debt, which we contrast with the use of bond finance and some rarely used financing methods like lease finance and Mezzanine finance. We note that the convergence of PFI financial practices allows for the use of financial models, which lend themselves to standardization. Our paper concludes with the proposition that a greater standardization of the planning practices associated with PFI, could help counter criticisms of PFI which view this type of procurement as inefficient and costly