Nr | Question | YES | NO | User comments | Reference to MGDD | |
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X. Early termination The purpose of this section is to discuss the Eurostat rules relevant to projects terminated before the end of their contract life and where contractual changes occur during their lifetime. Background information regarding contract termination can be found in EPEC's document "The Guide to Guidance - How to Prepare, Procure and Deliver PPP Projects" (chapter 4.1.6), published in July 2011. | ||||||
88 | Is government required to acquire the asset according to the termination clauses? |
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| PPP contracts include termination clauses in case the government or the partner cannot fulfil the contract or they persistently fail to meet their contractual obligations. In addition, government may use voluntary termination rights. Termination clauses will often require the government to acquire the asset and take on board all or part of the debt, with a penalty to be paid by the party at fault. Possible maintenance costs should also be taken into account. This is because the PPP asset is often a "dedicated asset" with limited resale value on the market for the partner and because government usually wants to retain a major influence on the asset. | VI.5.3.3/52 |
89 | Is government required to take on board all or part of the debt according to the termination clauses? |
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90 | Does the contract require a refund by government based on the capital costs, instead of the assessed market value of the asset at the time in the event of termination due to the partner's default? | on-balance sheet |
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| If the answer is "yes" and indemnity is based on, for instance: (i) the non-amortised cost of construction, or (ii) the net present value of the remaining contractual payments to the private partner, or (iii) the outstanding debt liabilities of the private partner, the construction risk is generally deemed to be with government. | VI.5.3.3/54 |
91 | Do amendments to the existing contract change the statistical treatment of the project? |
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| Risk sharing and risk analysis are crucial over the whole life of a project. In other words, risk distribution is important not only at the particular point in the time (e.g. before contract signature) but also during project implementation whenever events occur that may change the risk distribution (e.g. renegotiations). Renegotiations are a kind of termination without explicit penalty. They can be considered as cancelling the previous contract and creating a new one. Such renegotiations need to be analysed in order to assess whether changes introduced in the contract are substantial and if they alter the distribution of risks between government and the partner. | VI.5.3.3/55 |