Royal Liverpool signs 'lowest cost' PFI deal

The project includes a £335m private finance initiative deal for construction and ongoing maintenance of the new Royal Liverpool University Hospital, financed by a combination of equity and debt to be repaid over 31 years.

However, the trust said the amount of public and European Investment Bank funding going into this deal would contribute to making it “one of the lowest cost public private deals ever”.

This includes £90.5m debt from the EIB, £94m from the Department of Health, and £24m from the trust itself. The remaining funds will be provided by private investors, including Legal and General Investment Management, Lloyds TSB and Scottish Widows Investment Group.

Equipment, landscaping, and demolition costs will bring the total price tag for the project up to £429m, with the trust covering this additional £94m itself.

Helen Jackson, Royal Liverpool director of strategy and redevelopment, said that annual repayments would be over £10m less than initial projections and around 5 per of trust income. She claimed it would be “one of the lowest cost public private deals ever”.

She told HSJ that annual repayments to the private sector would be £19.1m at today’s prices, compared to £34.3m in the original business case. She added that while Treasury funding had helped “enormously” with the reduction, a number of factors contributed: “We’ve benefited from a very good proposal from Carillion… and some funding markets are very competitive at the moment.”

“We’ve been working with the European Investment Bank for a number of years and their contribution to the senior debt has been extremely helpful,” she said.

Ms Jackson said the deal had many aspects of “PFI 2” − the government’s new private finance regime − including public sector capital and contract transparency, and that it would be one of the first schemes to have reduced indexation of the unitary payment, with just 40 per cent indexed to inflation.

Developers Carillion will build the new facility, with completion expected in 2017 and the trust planning to move into the building that August.   

The hospital will have 18 theatres and 23 wards and will be the largest in the country to provide all in-patients with single en-suite bedrooms.

It will form part of a new “BioCampus” linking clinicians, life sciences companies and the city’s universities, which the trust says will create up to 5,000 new jobs.

A spokesman for the European Investment Bank told HSJ that as a long term lender the institution was able to provide cheaper loans than the commercial sector. He said the bank had assessed the financial strength and technical viability of Royal Liverpool’s proposal, and believed the BioCampus had strong innovation, education and employment potential.   

Ms Jackson said the new building would provide the catalyst for a wider transformation programme, and that single en-suite bedrooms would help reduce infections and improve patient privacy. The redevelopment will also allow Clatterbridge Cancer Centre − a specialist cancer provider − to move onsite, allowing the complete cancer pathway to be provided at the Royal Liverpool.