INDEPENDENT TRUST FINANCING FACILITY APPLICATION

Transcription

1 INDEPENDENT TRUST FINANCING FACILITY APPLICATION Name of Trust: Lewisham and Greenwich NHS Trust Amount Proposed: 1) 28,000,000 (PDC) 2) 20,100,000 (Term Loan) 48,100,000 Date of application: 18 June 2016 Code: RJ2 Region: Area: London Commissioning Region NHS England London Main Commissioners: (2016) NHS Lewisham CCG 152, % ( '000) NHS Greenwich CCG 121, % NHS Bexley CCG 59, % NHS England (Excluding drugs) 29, % NHS England Drugs 22, % Others 132, % Total Income 518, % Term Debt Limit Drawn Maturity Rate Existing Loans (PFI) 114,284, ,284,000 01/10/2030 (DH) 5,445,000 5,445,000 15/09/ % (DH) 3,656,000 3,656,000 15/03/ % (DH) 254, ,000 15/03/ % (DH) 4,416,849 4,416,849 18/03/ % (DH) 39,376,000 39,376,000 18/02/ % Total Existing: 167,431, ,431,849 Amounts Proposed: 20,100,000 Total Term Debt: 187,531, % CoSR Working Capital Facility 10,000,000 Total Commitments: 197,531,849 Purpose of new financing: Term / Repayment of new finance: A site wide refurbishment and rectification scheme at Queen Elizabeth Hospital, Greenwich 1) PDC 2) 25 Years Interest rate: 1) PDC Rate currently: 3.50% pa 2) NLF EIP Rate 1.18% pa Security/Covenants Negative pledge Fees: NIL Estimated Debt Capacity: Sept 2015 Beds Occupancy Long Term (1.25 x debt service cove CoSR 27,078,030 Daycase 89 89% Working Capital (Days OpEx) 7 10,150,633 Overnight 1,002 95% Date of Authorisation: #N/A FTE July 2015 Doctors 770 Trust Type (No of Sites): Acute - Medium (2) Staff 4,778 Total 5,563 Care Quality Commission Rating: Requires Improvement (all areas) Average FTE 57,471 Monitor Published Rating: Finance: #N/A Governance: #N/A Mortality Indicator SHMI: Band: 2 (1 high/3 low) Reference Cost Index (2014/15): 104 (MFF adjusted) 115 (Non-adjusted) Benchmark Ratios: Required (Tier 2) Projected (max) Minimum dividend cover >1x 0.26 Minimum interest cover >2x 1.18 Minimum debt service cover >1.5x 0.50 Maximum debt service / net revenue <10% 2.4% Debt / net assets 80.1% #N/A

2 Lewisham and Greenwich NHS Trust (LGT) Introduction DH has requested that ITFF reviews this transaction from a commercial viewpoint, on the assumption that it is essential to ensure patient safety, but not affordable by the LGT given its current financial challenges. LGT has been experiencing an increasing number of serious incidents arising from infrastructure failure, particularly of electrical power, water supply and water quality resulting from design defects, maintenance issues and failings of the building and engineering infrastructure on the Queen Elizabeth Hospital (QEH) potentially giving rise to a risk of harm to patients. Serious Incident reports were logged between July and mid-november 2015, following failures of stand-by power to high-risk clinical areas of the Hospital during a power outage and generator testing, loss of water supply, flood damage, and most recently a lack of radiation protection in the operating theatres. The infrastructure issues arise from unresolved legacy problems with the 60 year PFI Concessionaire Agreement between the Meridian Hospital Company (Project Co) and the now dissolved Greenwich Health Authority, and derive from failures in specification and design standards, cost cutting at construction and contract terms that give the present Trust limited redress against defects arising from the initial design and installation. Having taken legal advice, the Trust is not pursuing legal redress against Project Co in respect of infrastructure remedial works as this is now highly likely to be time-barred and as a very early form of PFI contract, it also lacks some of the protective provisions introduced by later guidance in the Treasury s Standardisation of PFI Contracts. The Trust continues to use the Partnership Board to attempt to influence Project Co to make a financial contribution to the proposed scheme required to remedy the defects. Any contribution that might be received would be treated as upside gain but not included in the base case modelling. In view of the current financial condition of the Trust, any development options therefore require external investment in the form of NHS capital and revenue support. This was accepted in the 2013 Transaction Agreement relating to the merger of University Hospital Lewisham and QEH. Background to the Trust LGT was established on 1 October 2013; an integration of Lewisham Healthcare NHS Trust with Queen Elizabeth Hospital (formerly part of South London Healthcare NHS Trust which was dissolved following the enactment of the Unsustainable Provider Regime). LGT is a large acute NHS Trust, providing a wide range of secondary care services from two principal sites (University Hospital Lewisham, in the London Borough of Lewisham and Queen Elizabeth Hospital, in the London Borough of Greenwich) to around 526,600 people 1

3 living and working across south east London. In addition, the NHS Trust provides a range of community services in Lewisham. LGT also currently delivers some of its elective services at Queen Mary s Hospital, Sidcup. This arrangement alleviates capacity pressures at Queen Elizabeth Hospital (QEH) and is a legacy of the former South London Healthcare NHS Trust. The NHS Trust plans to repatriate patients from Queen Mary s Hospital to LGT s two principal sites and is developing a separate Business Case to support this. The NHS Trust employs approximately 5,500 WTE staff and manages over 1,090 acute beds. EBITDA for 2015/16 was mn, less than half the previous year, with an EBITDA margin of only 2.42% (5.35% in 2014/15). This was delivered from total income of mn and resulted in an operating deficit of mn and a retained deficit after financing costs of mn. As part of its funding arrangements, LGT receives PFI funding from the Department of Health to support the revenue consequences of its PFI. For 2015/16 this PFI support totalled 15.6 million. As at the end of July (month 4), the Trust had generated EBITDA of 1.128mn, a negative variance of 1.303mn against plan. Planned EBITDA for the year is 8.666mn, significantly lower than in previous years. There was a CIP shortfall of 1,625k against the YTD target of 5,685k. The Proposed Scheme A refurbishment scheme to rectify the identified infrastructure issues (Option 2) has been identified as the preferred and most cost effective option (against do nothing or a full rebuild). The capital cost of this option is estimated at m (at BIS PUBSEC Firm Price Index 234, inclusive of fees, non-works costs and Optimism Bias but excluding VAT, which is recoverable), and including an anticipated Premium to be levied by Project Co. Whilst the Trust considered whether the preferred option could be procured outside the PFI contract, it concluded on legal advice that this wouldn t be feasible as the scheme will have to be procured via a variation to the Concessionaire Agreement. However the Trust plans to take a commercial approach to the procurement of the works by Project Co, with some key milestone dates leading to the agreement of the Deed of Variation and Financial Close by July 2017 prior to the main body of works starting on site. The Trust also aims to improve some of the terms of the Concessionaire Agreement, to bring them into line with what are now the standard clauses of PFI contracts, enabling better management of the contract and for the Trust to ensure Project Co attains a higher level of performance. The annual revenue consequences of the preferred option are estimated at 4.4m per annum from Year 6, rising with inflation to 10.1m per annum by Year 25. The total impact on the Income and Expenditure Account is forecast to be 137m (including inflation) over the 25 year project life, equivalent to 5.5m per annum. Given the Trust s current financial position, these revenue costs will need to be funded by commissioners, or from an alternative source. 2

4 There is an appraisal (below) of the costs of financing the scheme through the existing PFI Unitary Charge against two different routes for public sector capital (PDC v Debt). The public sector options emerge with lower financing costs. Option 2 PDC ITFF PFI No inflation Inflation included No inflation Inflation included No inflation Inflation included Non-Pay Costs Maintenance 43,736 43,736 43,736 43,736 43,736 43,736 Life cycle 43,736 43,736 43,736 43,736 43,736 43,736 Inflation on non-pay costs 49,736 49,735 49,736 EBITDA (87,473) (137,208) (87,473) (137,208) (87,473) (137,208) Interest payable 0 0 (19,088) (19,088) (60,418) (60,418) Depreciation % ,333 21,333 20,736 20,736 I & E Deficit (Breakeven) (87,473) (137,208) (85,228) (134,963) (127,155) (176,890) Taking account of recoverable VAT, the capital funding requirement for the preferred option is 48m. This sum is in excess of the 28mn accepted in the 2013 Transaction Agreement as requiring funding by the TDA, because of a more detailed evaluation of the condition of building infrastructure. The gap between it and the required standards has revealed more extensive safety risks, defects and non-compliances than the very high-level assessment that formed part of the Transaction Agreement. Although the Do Nothing option is included in the options appraisal, the Trust s analysis of risk, and advice from its technical consultants, suggests that patient safety is compromised by the state of the building infrastructure. Assumptions The following assumptions have been used to model the financial impact of the preferred option: (i) Inflation has been applied to capital costs as supplied by external advisers. (ii) Inflation has been applied to non-pay costs at 4.5%. (iii) (iv) (v) (vi) (vii) Capital works will be designed and then tendered by Project Co. Therefore it has been assumed that VAT will be fully recoverable for the works and design team. PFI contract has a break clause in October 2030 when the loan capital is deemed fully repaid. It has been assumed that capital will be depreciated over 25 years from the end of the construction period. The financing for the capital expenditure has been taken as net of VAT for the purposes of modelling. It has been assumed that maintenance and lifecycle costs each at 5% of the preinflated capital costs will be charged to the Trust over and above the existing PFI 3

5 (viii) (ix) (x) (xi) (xii) provider costs. For the purpose of this financial modelling no reduction has been assumed for the existing lifecycle and maintenance costs. Interest rate of 3.07% has been taken from the Public Work Loan Board (PWLB) notice 416/15 fixed rates agreed on 27 th October 2015 for a loan period not more than 25 years taken as equal instalments in principle. The interest rate used to build the PFI model is 10%. This has been taken from the NHS Trust s existing PFI interest rates. Financing for Option 2 has been modelled on the basis of: a) PDC b) Loan from Independent Trust Financing Facility (ITFF) c) PFI It has been assumed that the capital expenditure in this business case will not give an increase in the recently revalued amount in the Estate. Therefore the capital spend has been fully impaired and so written off to Income and Expenditure Reserve. Any financial contribution that might be received from Project Co would be treated as upside gain but is not included in the financial modelling. Observations There are a number of points worth noting: 1) The evidence suggests that this work remains essential to continue the provision of services that are safe; 2) From a legal perspective, it would appear difficult to require Project Co to upgrade the infrastructure to ensure that it is fit for purpose, and the advice is to discount this as an option; 3) Because of the existing contractual structure, the only practical option is to procure the upgrade from Project Co, and there remain inherent risks around delivery and ongoing maintenance that will need to be covered off. LGT seems well aware of these risks; 4) The cost has escalated significantly since 2013, from 28mn to 48mn. There may be justifiable reasons for this but it should also be noted that the procurement costs include an undisclosed margin for Project Co, a 10% provision for contingency and a 10% provision for optimism bias; 5) Inflation of non-pay costs in the model is set at 4.5%, which seems high in the current climate of low interest rates; 6) The 25 year interest rate for ITFF borrowing is currently 1.18% (originally 3.07% in the model); 7) It is planned that the cost of investment will be written off on completion, so there will be no ongoing capital cost to the Trust of the PDC element of the funding package; 8) Maintenance and lifecycle costs are each set at 5% of the capital cost of the scheme, despite the writing off of capital costs within LGT. These ongoing costs may be inherent in the agreement with Project Co to ensure full risk transfer, but it is not clear whether the quantum reflects adoption of a standard rate within the original PFI contract, or covers a shorter remaining term of 14 years (based on the original 30 4

6 year break clause), given that actual lifecycle and maintenance costs will increase incrementally over the actual life of the assets; 9) Clearly LGT cannot afford the ongoing additional revenue implications and there will need to be a confirmation of additional income to support the proposal, presumably from commissioners. Conclusions There is a need to resolve the infrastructure problems for the longer term provision of safe services. The method of procurement proposed would appear to be the most appropriate and cost effective option in light of the existing contractual arrangements and taking into account external legal advice. Some elements of both the capital and revenue cost assumptions appear generous on the face of it and these need to be fully understood to ensure delivery of a cost effective solution. Inflation in revenue costs can compound significantly, so any index linking also needs to be properly assessed and applied, given the scale of the ongoing lifecycle and maintenance costs. Noting the foregoing and a difficult financial position, this would nevertheless appear to be a sensible, if not ideal, approach to resolving the problem. The split between PDC and Loan reflects the inflation in capital costs since 2013 in a pragmatic way, and any reduction in overall cost might be incentivised through a parallel benefit of reduction in loan costs. NR/

7 Appendix 1 Lewisham and Greenwich NHS Trust Type: Acute - Medium RJ2 Statement of Comprehensive Income 2012/ / / / /16 Statement of Cash Flows (CF) 2012/ / / / /16 RATIOS 2011/ / / / /16 000s 000s 000s 000s 000s Cash Flows from Operating Activities 000s 000s 000s 000s 000s 000s 000s 000s 000s 000s Revenue from Patient Care Activities 207, , , , ,508 Operating Surplus/Deficit 9,034 2,142 10,001 7,385 (10,336) EBITDA Margin 7.69% 7.85% 7.24% 5.35% 2.42% Other Operating Revenue 21,847 23,262 41,691 58,019 50,439 Depreciation and Amortisation 8,601 9,653 12,729 17,096 21,049 Surplus Margin (normalised) 1.79% -1.25% -0.46% -2.19% -5.67% Total Income 229, , , , ,947 Impairments and Reversals 0 7,163 4,933 3,216 1,853 Return on Net Assets (normalised) 3.27% -2.76% -0.62% -4.35% % Gross Employee Benefits (153,282) (150,710) (234,480) (319,732) (330,713) EBITDA 17,635 18,958 27,663 27,697 12,566 Other Operating Costs (66,868) (88,618) (137,616) (190,405) (198,570) Liquidity (Days OpCosts) (16) (11) (3) (15) (19) Operating Costs (220,150) (239,328) (372,096) (510,137) (529,283) Other Gains / (Losses) on foreign exchange Creditor Days OPERATING SURPLUS/(DEFICIT) 9,034 2,142 10,001 7,385 (10,336) Donated Assets received credited to revenue but non-cash (29) Debtor Days Investment Revenue Government Granted Assets received credited to revenue but non-cash 0 0 (60) 0 0 Cash (Days OpCosts) Other Gains and Losses 739 (44) (7) (31) 0 Interest Paid (5,708) (5,138) (11,794) (18,751) (19,115) Cash ( mn) 1,767 3,761 16,101 1,027 2,064 Finance Costs (5,708) (5,138) (11,794) (18,751) (19,115) Dividend (Paid)/Refunded (4,063) (4,477) (4,790) (10,103) (8,327) Current Ratio 69% 77% 103% 76% 70% SURPLUS/(DEFICIT) FOR THE FINANCIAL YEAR 4,092 (3,020) (1,767) (11,349) (29,401) Release of PFI/deferred credit Dividends Payable on Public Dividend Capital (PDC) (4,048) (3,990) (5,977) (9,401) (7,345) (Increase)/Decrease in Inventories (257) (135) (517) Transfers by absorption - gains , (Increase)/Decrease in Trade and Other Receivables (31,375) 12,721 1,190 Cashflow Ratio (EBITDA / Depr + Div) 139% 139% 148% 105% 44% Transfers by absorption - (losses) (Increase)/Decrease in Other Current Assets Capex Ratio (Capex / Depreciation) 52% 60% 111% 135% 81% Net gain/(loss) on transfers by absorption , Increase/(Decrease) in Trade and Other Payables (3,318) (924) 35,269 (8,104) 6,384 RETAINED SURPLUS/(DEFICIT) FOR THE YEAR 44 (7,010) 74,377 (20,750) (36,746) Increase/(Decrease) in Other Current Liabilities 0 0 (14,321) 0 0 Depreciation / Non-Current Assets 8.97% 10.70% 6.65% 6.76% 3.13% Other Comprehensive Income Provisions Utilised (820) (1,031) (3,777) (855) (700) Depreciation / Income 3.75% 4.00% 3.33% 3.30% 4.06% Impairments and reversals taken to the Revaluation Reserve 0 (16,857) (3,959) (35,187) 0 Increase/(Decrease) in Movement in non Cash Provisions (382) 1,127 2,656 (896) 382 Non-Current Assets / Depr (Years) Net gain/(loss) on revaluation of property, plant, equipment 10,568 8,398 66, ,875 Net Cash Inflow/(Outflow) from Operating Activities 3,503 9,436 (786) 1,574 (8,137) Non-Current Assets / OpCosts 89.28% 74.01% % 80.36% 75.76% Net gain/(loss) on revaluation of intangible assets CASH FLOWS FROM INVESTING ACTIVITIES Net gain/(loss) on revaluation of financial assets Interest Received Gearing (LT Liabs / Net Assets) 34% 36% 32% 34% 42% Other gains/(loss) (provide details on Freetext) (Payments) for Property, Plant and Equipment (10,411) (5,837) (13,918) (21,353) (12,299) Debt Coverage Ratio Net gain/(loss) on revaluation of available for sale financial assets (Payments) for Intangible Assets 0 0 (320) (1,810) (4,817) Net gain/(loss) on Assets Held for Sale (Payments) for Investments with DH Liquidity Rating Net actuarial gain/(loss) on pensions (Payments) for Other Financial Assets Debt Coverage Rating Other Pensions Remeasurements (Payments) for Financial Assets (LIFT) Overall Rating Reclassification Adjustments Proceeds of disposal of assets held for sale (PPE) 5, On Disposal of Available for Sale Financial Assets Proceeds of disposal of assets held for sale (Intangible) INVESTMENT 2011/ / / / /16 Other Comprehensive Income (subtotal) 10,568 (8,459) 62,044 (35,187) 21,875 Proceeds from Disposal of Investment with DH s 000s 000s 000s 000s Comprehensive Net Expenditure / Income for the Year 10,612 (15,469) 136,421 (55,937) (14,871) Proceeds from Disposal of Other Financial Assets Operating Cash Flow Proceeds from the disposal of Financial Assets (LIFT) Normalised Operating Surplus 9,034 9,253 7,848 7,278 (5,992) Statement of Financial Position 2012/ / / / /16 Loans Made in Respect of LIFT Depreciation and amortisation 8,601 8,374 8,366 7,251 6,653 NON-CURRENT ASSETS: 000s 000s 000s 000s 000s Loans Repaid in Respect of LIFT EBITDA 17,635 18,958 27,663 27,697 12,566 Property, Plant and Equipment 195, , , , ,533 Rental Revenue Working Capital Movements (4,361) 93 (11,865) 2,731 6,739 Intangible Assets 0 0 2,187 6,411 19,450 Net Cash Inflow/(Outflow) from Investing Activities (4,498) (5,812) (14,087) (23,115) (17,066) Total Cash from Operations 13,274 19,051 15,798 30,428 19,305 Investment Property NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING (995) 3,624 (14,873) (21,541) (25,203) Other Financial Assets CASH FLOWS FROM FINANCING ACTIVITIES Financing Received /(Paid) Trade and Other Receivables 1,367 1,806 2,821 2,821 2,988 Gross Temporary (2014/15 only) and Permanent PDC Received ,611 22,157 6,348 PDC ,111 5,215 (348) TOTAL Non Current Assets 196, , , , ,971 Gross Temporary (2014/15 only) and Permanent PDC Repaid 0 0 (10,500) (16,942) (6,696) Debt 2,560 (243) (502) 4,260 28,889 CURRENT ASSETS: Loans received from DH - New Capital Investment Loans 4, ,732 0 Leases/PFI (1,402) (1,387) (2,396) (3,008) (2,301) Inventories 2,390 2,294 5,527 5,662 6,179 Loans received from DH - New Revenue Support Loans ,500 Other Capital Receipts (net) Trade and Other Receivables 11,389 10,612 54,064 42,045 41,670 Other Loans Received Interest (5,681) (5,118) (11,762) (18,703) (19,065) Other Financial Assets Loans repaid to DH - Capital Investment Loans Repayment of Principal (460) (472) (472) (472) (787) Dividend (4,063) (4,477) (4,790) (10,103) (8,327) Other Current Assets Loans repaid to DH - Working Capital Loans/Revenue Support Loans (35,824) Net Cash from / (to) Financing (8,586) (11,225) 10,661 (22,339) (1,152) Cash and Cash Equivalents 1,767 3,761 16,101 1,027 2,064 Other Loans Repaid (1,546) (73) (30) 0 0 Sub Total Current Assets 15,546 16,667 75,692 48,734 49,913 Other Capital Receipts Cash Available for Investment 4,688 7,826 26,459 8,089 18,153 Non-Current Assets Held For Sale Cash transferred to NHS Foundation Trusts or on dissolution TOTAL Current Assets 15,546 16,667 75,692 48,734 49,913 Capital Element of Payments in Respect of Finance Leases and On-SoFP PFI and LIFT (1,402) (1,387) (2,396) (3,008) (2,301) Net Investment (4,525) (5,832) (14,119) (23,163) (17,116) TOTAL ASSETS 212, , , , ,884 Net Parliamentary Funding CURRENT LIABILITIES Capital Receipts Surrendered Net Cash Remaining / (Required) 163 1,994 12,340 (15,074) 1,037 Trade and Other Payables (19,176) (17,868) (67,077) (59,260) (64,460) Capital grants and other capital receipts (excl. donated / government granted cash receipts) Other Liabilities Cash Transferred (to)/from Other NHS Bodies (free text note required) Opening Cash 1,604 1,767 3,761 16,101 1,027 Provisions (1,577) (1,814) (2,994) (1,863) (2,122) Net Cash Inflow/(Outflow) from Financing Activities 1,158 (1,630) 27,213 6,467 26,240 Other financing Borrowings (1,460) (1,513) (3,008) (2,301) (3,673) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 163 1,994 12,340 (15,074) 1,037 Restatement Other Financial Liabilities Cash and Cash Equivalents ( and Bank Overdraft) at Beginning of the Period 1,604 1,767 3,761 16,101 1,027 Closing Cash 1,767 3,761 16,101 1,027 2,064 DH Revenue Support Loan Opening Balance Adjustment DH Capital Loan (460) (472) (472) (787) (787) Restated Cash and Cash Equivalents (and Bank Overdraft) at Beginning of the Period 1,604 1,767 3,761 16,101 1,027 Total Current Liabilities (22,673) (21,667) (73,551) (64,211) (71,042) Effect of Exchange Rate Changes in the Balance of Cash Held in Foreign Currencies NET CURRENT ASSETS/(LIABILITIES) (7,127) (5,000) 2,141 (15,477) (21,129) Cash and Cash Equivalents (and Bank Overdraft) at YTD 1,767 3,761 16,101 1,027 2,064 TOTAL ASSETS LESS CURRENT LIABILITIES 189, , , , ,842 NON-CURRENT LIABILITIES: Trade and Other Payables 0 0 (830) (757) (707) Other Liabilities Provisions (3,521) (3,380) (5,175) (4,552) (3,975) Borrowings (50,381) (48,868) (116,584) (114,284) (110,611) Other Financial Liabilities DH Revenue Support Loan (29,676) DH Capital Loan (10,481) (10,299) (9,827) (13,772) (12,985) Total Non-Current Liabilities (64,383) (62,547) (132,416) (133,365) (157,954) ASSETS LESS LIABILITIES (Total Assets Employed) 125, , , , ,888 TAXPAYERS EQUITY Public Dividend Capital 71,220 71, , , ,666 Retained Earnings reserve (31,247) (37,984) (41,033) (61,875) (121,448) General Fund Revaluation Reserve 85,013 76, , , ,607 Other Reserves Total 125, , , , ,888 6

8 Income Statement (Month 4) Appendix 2 M04 Trust Summary 000s Annual YTD YTD YTD M04 M04 M04 Budget Budget Actual Variance Budget Actual Variance INCOME Patient Care - SLA (448,530) (147,652) (147,038) (614) (36,700) (36,422) (278) Patient Care - Other (3,125) (1,088) (1,173) 85 (282) (296) 14 TOTAL PATIENT CARE INCOME (451,655) (148,741) (148,211) (530) (36,982) (36,718) (264) Transaction Run Rate Support (10,500) (3,500) (3,500) 0 (875) (875) 0 PFI Support (16,000) (5,333) (5,333) 0 (1,333) (1,333) 0 Other Income (36,163) (11,811) (12,100) 289 (3,058) (3,086) 28 CIP Programme - Income (52) (17) (112) 95 (4) (28) 24 TOTAL INCOME (514,318) (169,385) (169,144) (241) (42,248) (42,012) (236) PAY EXPENDITURE 331, , ,136 (419) 27,915 28,350 (435) CIP Programme - Pay (11,888) (3,410) (2,921) (489) (890) (651) (238) NON-PAY EXPENDITURE 162,149 53,951 55,882 (1,931) 13,047 13,748 (700) CIP Programme - Non-pay (11,558) (2,258) (1,027) (1,230) (674) (273) (401) TRUST CENTRAL AND RESERVE 11,661 1, , CIP Programme - Total (23,499) (5,685) (4,060) (1,625) (1,568) (953) (615) TOTAL TRUST EXPENDITURE 505, , ,018 (1,063) 41,034 42,097 (1,064) EBITDA (8,666) (2,429) (1,126) (1,303) (1,215) 85 (1,300) Finance and Depn/PDC 58,261 19,420 19, ,855 4,853 2 Surplus/(Deficit) 49,595 16,991 18,289 (1,298) 3,641 4,939 (1,298) IFRS/PFI Technical Adj. (12,705) (4,235) (4,235) 0 (1,059) (1,059) 0 Donated Asset Adj. (90) (30) (30) 0 (8) (8) 0 PRE STF NHS REPORTED POSITION 36,800 12,726 14,024 (1,298) 2,574 3,873 (1,298) ST Funding (16,600) (5,533) (4,150) (1,384) (1,383) 0 (1,383) POST STF NHS REPORTED POSITION 20,200 7,193 9,874 (2,682) 1,191 3,873 2,682 7

9 Appendix 3 Option: 2 Worked up Full Compliance 000s Departmental Costs Emergency power distribution 147 Patient isolation rooms and en-suites 2814 Ventilation systems aseptic suite 471 Medical gas outlets, bed head services 530 Patient and equipment preparation room for Cardio Catheter Suite 165 Maternity Triage room 3E02 to 3E air changes ventilation systems to anaesthetic gas served areas 131 Ventilation systems low level extract to anaesthetic gas served areas 131 Fire alarms 571 Surgical compressed air, MA7 131 Ventilation to radiology area AGSS 249 Medical gas alarms 33 Upgrade to Theatres Works Cost External Building and Engineering works Drainage 206 Services outside buildings 905 Steam, condensate, heating, hot water and gas supply mains 2322 Cold water mains and storage 326 Electricity mains, sub-stations, stand-by generating plant Miscellaneous services 1967 Auxiliary Buildings 1789 Other on-costs - Engineering 3190 Provisional location adjustment (if applicable) 2968 Fees 4559 Non works costs - Survey and Investigation/decant costs 2499 Planning 10% 3971 Optimism 10% Total Capital Expenditure

10 Appendix 4 Name of Trust Lewisham and Greenwich NHS Trust (Normalised) Based on year ending 31/03/2016 Assumptions Total Revenues 518,947,000 CoSR Debt Service Ratio Former Prudential Borrowing Code Rating Ratio* Surplus/(Deficit) before Interest ( 10,336,000) 4 >2.25 X Passes PBC Depreciation and adjustments 22,902,000 Revenues available for Debt Service 12,566,000 3 >1.75 X Required Covenant Ratio Dividends Paid ( 7,345,000) 2 >1.25 X Fails PBC Total Assets Employed 221,888,000 1 <1.25 X Estimated Maximum Debt 27,078,030 (Existing Profile) Current Risk Rating 1 Data Input Debt sustainable based upon Rate and Term Debt sustainable under former Individual Covenant Tests Proposed Debt New CoSR Debt Service Test Former TIER 2 Prudential Borrowing Test Debt to Capital Ratio 80% 12% 12% 16% 24% 38% 47% 234% Calculated Debt 177,832,000 27,078,030 27,078,030 36,104,040 Calculated PBL 53,687,091 83,773, ,716, ,947,324 Coverage Ratio (year one)* Annual Int Payable 3,221,225 5,026,395 6,283,010 31,136,839 Annual Repayment 2,147,484 3,350,930 4,188,673 20,757,893 Term of Loan (based on EIP equivalent) Annual Debt Service 5,368,709 8,377,326 10,471,683 51,894,732 Tier 2 Interest Rate 6.00% 6.00% 6.00% 3.50% Min Dividend Cover Interest 10,669,920 1,624,682 1,624,682 1,263,641 Min Interest Cover Principal 7,113,280 1,083,121 1,083,121 1,444,162 Debt Service 17,783,200 2,707,803 2,707,803 2,707,803 Min Debt Service Cover Dividend 7,345,000 7,345,000 7,345,000 7,345,000 Capital Service 25,128,200 10,052,803 10,052,803 10,052,803 Max Debt Service/Rev 10.0% 1.03% 1.61% 2.02% 10.00% 9