The EIB loan will co-finance the redevelopment of the Freeman Hospital and the Royal Victoria Infirmary in Newcastle upon Tyne, which is an Objective 2 Regional Development Area. The project will rationalise acute hospital services within Newcastle from three to two sites, relocating services from Newcastle General Hospital to the Royal Victoria Infirmary (RVI) and Freeman Hospital. It will ensure a more efficient delivery of clinical services in Newcastle, as well as providing long-term benefits for the Newcastle-upon-Tyne Hospitals NHS Trust.

The project is being implemented as a PPP project as part of the UK government's Private Finance Initiative. The project's promoter is the New Castle upon Tyne Hospitals National Health Service Trust, a public sector statutory corporation responsible for the delivery of acute health care services to Newcastle and the surrounding area. By implementing the project as a PPP project the UK Government expects to reduce the costs of procuring and operating the hospital over its lifetime, as a result of both increased efficiency in building and facilities management and transfer of construction and design risk to the private sector.

The concessionaire is Healthcare Support (Newcastle) Finance Limited, a special purpose vehicle owned by John Laing Plc (40%), Commonwealth Bank of Australia (40%) and Interserve plc (20%). The concessionaire will through its sub-contractors provide the building facilities, non-clinical services and maintenance required over the 38-year life of the concession. Laing O'Rourke will design and construct the new hospital and Interserve will provide hard facilities management services.

The project will be financed from a combination of GBP 238 million senior bonds and GBP 115 million-loan facility provided by European Investment Bank (both index-linked), together with junior subordinated loan stock and ordinary shares. XL Capital Assurance Limited will provide a guarantee on the scheduled payments of principal and interest under the Index-Linked Bonds and the EIB Loan.

EIB Vice President Peter Sedgwick commented: We are particularly pleased to co-finance this project as it represents an important part of the reorganisation of the acute health services in Newcastle. The project will contribute to increased efficiency and quality of the Newcastle medical services and therefore it will help to implement the UK Government's regional and national health priorities.

In the past, the EIB has financed four PPP projects in the UK Health Sector: Dudley Group of Hospitals, Blackburn Hospitals, North East London Hospitals and Manchester Hospitals.

The mission of the EIB, the European Union's financing institution, is to contribute towards the integration, balanced development and economic and social cohesion of the Member States. Outside the Union, the EIB implements the financial components of agreements concluded under European development aid and cooperation policies.

Within the recent five years (2000 - 2004) EIB lending in UK has reached a total of EUR 15.5 billion. Of this sum, EIB loans in the UK health and education sectors represented approx. EUR 1.3 billion. Investments in these areas are in accordance with the EIB priority to help strengthen economic competitiveness, particularly in the less favoured regions, providing for a better-educated and healthier population. In 2004, EUR 21.5 billion, representing 75% of the total EIB lending in the EU, was provided for projects implemented in the less developed regions of the Union, such as Northeast England.