Termination for prolonged force majeure

PPP contracts normally provide for the possibility for either party to terminate where a force majeure event precludes performance of the obligations for a prolonged period of time. In this case, the general principle adopted is that since neither party is at fault, the burden of termination should be shared. The compensation payable by the Authority will therefore normally be (i) higher than that owed in the event of PPP Company default but (ii) lower than that due on Authority default. The compensation would normally cover the outstanding debt (and the hedging breakage costs). It may sometimes also cover the value of the equity injected into the project (but exclude any return on that equity).