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A Material Adverse Effect regime is a risk mitigation tool that can assist in allocating difficult areas of risk.

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Some risk events may, if they eventuate, have a Material Adverse Effect on those project revenues used by the Private Party to make scheduled debtor equity repayments.

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A Material Adverse Effect regime is most effective when used to specify the outcome the parties wish to be achieved if the risk eventuates, such as maintaining the Private Party's ability to make debt or equity repayments in accordance with the defined schedule.

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The Project Agreements will allocate the relevant category of risk to a party in the normal way; for example, force majeure risk would be allocated to the Private Party in accordance with the Risk Management Supporting Document.

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The Project Agreements will then specify those categories of risk, such as force majeure, to which a Material Adverse Effect regime will apply.

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The Project Agreements will also identify what outcomes are to be achieved through the regime, such as maintenance of a revenue stream sufficient to service debt repayments.

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The Project Agreements will provide that if:

- a risk with in the specified categories materiallises; and

- it has a Material Adverse Effect on the project;

then, the parties will negotiate in good faith to agree on the appropriate method of redress to achieve the pre-agreed outcomes, by, for example, extending the concession period.

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If a risk within the specified categories materiallises, but its effect on the project is not material, the risk will be borne by the party to whom the risk was allocated in the Project Agreements. In the above example of force majeure, this would be the Private Party.

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This type of regime is Government's preferred approach for difficult-to-allocate risks, as it offers the flexibility of an "agreement to agree', leaving the parties to decide on the appropriate methods of redress at the time, combined with the certainty of a prescriptive, black-letter solution [as the desired outcomes are defined in advance).