Variables | Description | Factors to consider |
Timings | • The contract period is restricted to intervals between 6 and 40 years | In the event that the start of operations is phased, with the unitary charge |
| • The Spreadsheet allows the user to consider a situation where service begins prior to the end of the major capital expenditure period. The percentage of the unitary charge paid in this short period should be entered in the Unitary Charge box, cell M13 | payable during the period prior to the end of the construction period, increasing over time, then the average share of the full unitary charge payable during the semi operational period will need to be determined separately, before being entered into cell M13 |
CapEx Escalator | This escalator increases the projected level of Capital Expenditure during the main construction period at the start of the Contract. | See 1.44 - 1.45 |
OpEx Escalators | The OpEx (employment) escalator is applied to all wage related costs, whilst the OpEx (non employment) escalator is applied to all non wage operating expenditure, lifecycle costs and Third party income. | Non employment OpEx will be equal to the GDP deflator. The OpEx (Employment) escalator should reflect the projected increase in salary and wage costs. 1.46 - 1.47 |
Unitary Charge Escalator | Applied to the unitary charge in full and shown as the percentage of the OpEx (non employment) escalator | 1.48 and section 3.2 of HMT Application Note: Interest Rate & Inflation Risks in PFI Contracts3 |
Nominal Discount rate | This is based on the Green Book real discount rate of 3.5% and GDP Deflator assumption of 2.5%. It is a hard-wired input |