10.30 The financing of NPD projects differs to traditional PPP projects as there is no return on equity. Surpluses are instead donated to charity.
10.31 NPD projects which have closed to date have included senior debt financing on similar terms to standard PPP projects.
10.32 NPD Projects differ, however, in the provision of junior debt/risk capital. Pinpoint equity will be injected into the NPD project but will be "stapled" i.e. bound to the subordinated debt funds. As the subordinated debt carries more risk than a traditional PPP, possibly around an additional 1% on the subordinated debt coupon rate.
10.33 The risk capital may be provided as mezzanine debt rather than subordinated debt. If this is the case, advice should be obtained from the scheme's financial advisors regarding the VfM implications of the proposed financing.