Schedule Part

Comment

23

Refinancing

23

On NPD projects, Schedule Part 23 should be read in conjunction with the Mandatory NPD Articles of Association which set out the Public Interest Director's rights in relation to instigating Refinancing (which in turn mirror the rights that sit with the Authority under SoPC4 guidance).

Paragraph 5

The Authority should take into account UK Accounting Standards when deciding how to take any share in refinancing out of the project. Under current (March 2011) Accounting Standards the Authority will be required to take the benefit by way of a reduction in Annual Service Payments under paragraph 5.2 to ensure that benefits from the Project are seen to be applied to the Project.

Paragraph 5 (NPD projects only)

Mirror provisions to be included in the Subordinated Funding Agreements to allow the subordinated lenders to receive payment of Project Co's share of the Refinancing Gain. The parties ought to be entitled to receive their share of the Refinancing Gain in a lump sum to the extent that the Refinancing creates an amount capable of immediate payment subject to accounting and tax considerations in respect of which Authorities should take advice. To the extent that the Authority elects and/or the Refinancing Gain arises throughout the life of the project (e.g. where there is a change in senior debt margin) it will be payable (or, as the case may be, taken as a unitary charge reduction) throughout the remainder of the project

Exempt Refinancing

The defined terms referred to in limb (c)(vi) should follow those contained in the Senior Funding Agreements - the Initial Availability Period being the construction phase drawdown period. These will need to be checked.

Qualifying Institutions

If there are particular institutions which, for particular reasons, do not come within the other heads of Qualify Bank Transaction the SPV may propose to the Authority that such institutions be included as Qualifying Institutions. In the light of the broad drafting of the other provisions in the definition of Qualifying Bank Transaction, the Authority would expect any such proposal to be specific and limited. Broad group definitions will not be entertained.

Refinancing Gain (NPD projects only)

The commercial position is that Project Co's share of the Refinancing Gain is paid to the subordinated lenders rather than directed to the Surplus Account. Provision therefore needs to be made in the Subordinated Funding Agreements for that payment to be made. To avoid circularity, the overall Refinancing Gain needs to be calculated on the basis of arrangements before that payment is made.

Threshold Equity IRR

This is the nominal post tax (i.e. post tax with respect to the SPV, pre-tax with respect to the shareholders in the SPV) Equity IRR set out in the Base Case, which excludes the effects of any anticipated refinancing.