1.4.1 The Authority is only entitled to share in the Refinancing Gain if the Contractor is projected to achieve the original base case Equity IRR-the Threshold Equity IRR-before taking the Refinancing Gain into account.
1.4.2 To calculate whether this hurdle has been crossed, an updated Equity IRR projection (the Pre-Refinancing Equity IRR) should be calculated for the whole life of the Project, taking into account:
• Timing and amounts of the original investments of equity and shareholder subordinated debt;
• Distributions received by Relevant Persons up to the Refinancing date;
• Projected Distributions as shown in the pre-refinancing model.
1.4.3 If the Pre-Refinancing Equity IRR is greater than the Threshold Equity IRR, the Authority is entitled to its 50% share of the Refinancing Gain.
1.4.4 If this is not the case a calculation should be carried out to find the notional amount which, if received by investors as at the Refinancing date, would increase the Pre-Refinancing Equity IRR to the Threshold Equity IRR. This should be deducted from the Refinancing Gain; the Authority is then entitled to receive its 50% share of any remaining balance of the Refinancing Gain.
1.4.5 Payment of any such notional "catch-up" sum should be deducted from the increases in future projected Distributions before allowing for payment of the Authority's share as set out in Section 1.5.