NHS trust buys back its PFI debt

Tees, Esk and Wear Valleys Mental Health Foundation Trust has paid off its contract with its private equity holders for the re-build of West Park Hospital in Darlington, County Durham, trust board papers reveal.

The 30 year PFI arrangement would have seen the trust pay the equivalent of £32.15m to Norwich Union Public Private Partnership Fund, now trading as Aviva, Treasury figures show.

The deal was signed in 2003 and annual repayments for the project, which had a total capital value of £16m, started in April 2004.

The trust’s January board papers show the full repayment was made in December after being deferred from October.

Colin Martin, finance director at the £250m annual turnover trust, told HSJ the “voluntary termination” cost £18m and would release £2m a year from its income and expenditure account.

He said: “We paid off the senior and junior debt and picked up the legal fees, which were a couple of hundred thousand pounds.”

He added he believed there was “potential” for other NHS organisations to do the same.

The foundation trust’s accounts for 2009-10 show that on 31 March 2010 it had £41.6m cash and cash equivalents on its balance sheet - up from £26.7m the year before. The trust is continuing to generate a significant surplus and in December forecast a surplus for 2010-11 of just under £6m.

Although Tees, Esk and Wear Valleys’ scheme is small in comparison with most acute trusts, there are 17 trusts in England that have private finance schemes with capital values of £25m or less.

Foundation Trust Network director Sue Slipman said she suspected buy-backs would only be an option for trusts with comparatively small PFIs.

“I haven’t heard of anyone else talking about this” she said. “There’s no standard contract around PFI so it would have to be a deal-by-deal examination on how you would go about it.”

A study of hospital PFI released by the National Audit Office in June found most contracts were well managed but 12 per cent of trusts had no one managing the contract full time.

Norwich Union Public Private Partnership Fund has private finance schemes with two acute trusts, a primary care trust and another mental health trust.