The chief executive of the foundation trust with the biggest cash surplus has said his organisation will use its £120m to minimise its dependence on the private finance initiative.

University College London Hospital chief executive Sir Robert Naylor's comments follow criticism of the growing size of foundation trust surpluses in a joint report by the Audit Commission and Healthcare Commission last week.

The bulk of UCLH's surplus stems from the sale of a redundant hospital site in 2006-07, six years after the trust signed a 32-year PFI deal for the redevelopment of its main site.

The capital value of the PFI scheme is£422m, but payments to the PFI company, which include charges for facilities management services, will cost the foundation£1.9bn by the end of the contract.

Sir Robert said: "In the 1990s, prior to becoming a foundation trust, we had no alternative but to use PFI for our main site development. But now we want to explore more innovative options by using our surpluses to fund new developments.

"We have big opportunities to work with commercial, academic, private and charitable partners and we have a great starting point because we have achieved this surplus."

The foundation trust's development plans include a cancer centre, a cardiac centre and a dental hospital, costing up to£500m. To afford that, it may also need to use its hitherto-untouched borrowing capabilities and the profit from the planned sales of two more major sites, worth more than£100m.

Sir Robert said the foundation had "made it clear" to the PFI company that it wanted to be involved in any future discussions about the refinancing of the deal. Although the size of UCLH's accumulated cash surplus alone is not enough to buy out the PFI deal completely, the foundation's growing ability to generate surpluses would give it "substantial leverage" in any fresh negotiations on the level of debt.

A spokesman for foundation trust regulator Monitor said it would review the recommendation in the commissions' report that it should assert tighter controls on surpluses as part of its routine annual reassessment of its compliance framework.