Interserve Transfers PFI Investments To Pension Scheme

Interserve, the services, maintenance and building group, has announced an agreement to dispose of its interest in a portfolio of 13 PFI investments, valued at £61.5 million, into the Interserve Pension Scheme ("the Scheme").

These investments are in projects across a variety of sectors in the UK, including healthcare, defence and education, and represent a significant proportion of the Group's total interest in a portfolio of 34 PFI projects.

Interserve will continue to manage the investments on behalf of the Scheme and retains all current arrangements for the delivery of facilities services worth a whole-life-value of over £1.3 billion. All future interest and dividend income over the lifetime of these investments will be payable to the Scheme.


The agreed valuation of £61.5 million represents an effective discount rate of 6.5% and a multiple of 2.6 times invested capital. Consequently the Scheme's funding shortfall at the end of the year will be reduced by this valuation and the Group will record an exceptional profit of c. £35 million in the 2009 Income Statement. Profits attributable to these assets in the first half of 2009 were £1.7 million (2008 full year: £3.3 million). The resulting reduction in Group operating profits, arising from the loss of income from these investments, will be largely offset in the Group Income Statement by the corresponding increased return on assets in the Scheme, as reported within the net interest charge.

Tim Jones, Group Finance Director of Interserve, commented: "This agreement is very good news for all stakeholders, providing a significant contribution towards the current pension scheme funding shortfall whilst crystallising value from our PFI portfolio. These investments are particularly attractive to the pension scheme, providing a stream of long-term predictable cash-flows with a sensitivity to inflation that matches the scheme liabilities."

(CD/GK)