Key features

The NPD model is defined by the broad core principles of:

• enhanced stakeholder involvement in the management of projects;

• no dividend bearing equity; and

• capped private sector returns.

Projects funded using NPD principles will pay a fixed return to the holders of the subordinated debt of the SPV. All other distributions to equity (i.e. the holders of the shares and subordinated debt of the SPV) will be prohibited. Surpluses arising after satisfying all precedent lines in the cash cascade, subject to any agreed prudent reserve, will either be payable to the Authority either in lump sums as they arise or used to reduce the future service payments.

Other key features of the NPD model are:

• Corporate structure: the Authority will contract with an SPV (referred to in the Standard Project Agreements as "Project Co") which will be majority owned and controlled by the private sector investors. The Authority will own a "golden share" in the SPV which gives it certain controls over the corporate, governance and management structures within the SPV. The SPV's articles of association must incorporate the mandatory NPD articles, produced by the SFT, that enshrine the fundamental principles of the NPD model.

• Public Interest Director: One of the SPV's directors will be appointed by the SFT. The Public Interest Director will bring an independent voice to the SPV's board and ensures a greater degree of transparency and accountability.

• Refinancing: Under the NPD model the Public Interest Director has the right to instigate a refinancing on the same basis as an Authority may instigate a refinancing under SoPC4 guidance.

Further detail on the NPD model is contained in the NPD Explanatory Note available from the SFT.