On termination of the project agreement resulting from a Default Termination Event, government will pay the private party an amount equal to the fair market value of the Project. If a liquid market exists, Government will determine the fair market value of the project by re-tendering the project in accordance with section 26.1.1. If no liquid market exists, of if government otherwise elects, the Independent Valuer will calculate the Estimated Fair Value of the project as between a willing buyer and willing seller in accordance with section 26.1.2. In each case the deductions described in section 26.1.3 will apply.
In the case of re-tendering (as described in section 26.1.1), from the Termination Date until the date the Default Termination Compensation Amount is paid, government will pay the private party a post-termination service fee calculated as the full service fee less:
(a) The greater of all cost components related to the provision of the hard and soft services, and the cost to government of alternative provision of the services;
(b) cost components related to the provision of insurance; and
(c) rectification costs incurred by government118.
This will generally be deducted from the final Default Termination Compensation Amount.
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118 The term of the new project agreement will typically be the same as the unexpired term of the terminated project agreement (i.e. the expiry date in the new project agreement will be later than that in the old project agreement by the amount of time the re-tendering procedure has taken). In such circumstances, any post termination service amounts should be deducted from the ultimate termination payment made. It may be, however, that a service requirement can only be delivered for the period that expires on the original expiry date. In such circumstances, it would not be possible for the term of the re-tendered project agreement to be for a period equal to the unexpired term of the original project agreement and the parties will have to fix a date for the new project agreement to come into effect, so that tenderers can bid for a fixed term. In such circumstances the post termination service amounts should not be deducted from the ultimate termination payment made.