Non Profit Distributing Model
The widespread adoption of a new funding model for major infrastructure projects across the UK may have moved a step closer thanks to a key decision that has come to light. The Non-Profit Distributing (NPD) Model is an alternative to the much-maligned Private Finance Initiative (PFI) in which surplus profits are reinvested in the public sector rather than going to the private sector as unpopular 'windfall' payments.
The NPD had been developed in Scotland, and was beginning to gain traction in Wales, where the Welsh Government had committed to using it for three major projects.
However the NPD model was effectively placed on hold due to a decision by the Office of National Statistics that one such scheme (the Aberdeen Western Peripheral Route) had to be given a public 'on balance sheet' classification. Under Treasury budgeting rules, this meant that capital charges were payable by the purchasing body – threatening to make NPD schemes unviable.
It now appears the Scottish Government has agreed a structure with ONS which would allow future NPD projects to remain 'off balance sheet', making NPDs a viable option again.
Simon McCann, a partner in the commercial team at Blake Morgan and a specialist in NPD projects summarises his thoughts on this model and its potential use.