3.9.1 In the ordinary course of events, no public sector capital contributions should be made to the Project, and no Unitary Charge should be payable, until the Works have been completed and accepted. In certain exceptional circumstances however (for instance where the Project frees up surplus land and the Authority is able to sell this and use the proceeds) an Authority may want to make a capital contribution of its own to the Project or may have some other form of co-financing proposal. Authorities should always discuss any such proposal at an early stage with SIB, and if appropriate, the Economic and Policy Unit or the Department of Finance & Personnel. Any capital contributions, if approved, should be kept to a modest size. PFI is concerned with payments for Services rather than public sector capital financing. A large contribution may upset the risk transfer balance and incentives of the Project (especially where the Project gets into difficulty). Any contributions should be scheduled to, or towards, the end of the Construction period and linked to acceptance of the Service or other important milestones (e.g. completion of whole schools on a grouped school project). In any event it is important that any Authority payments are not paid towards advisers' fees or working capital or other similar costs.
If there is a construction delay or cost over-run and there is any rescheduling of Senior Debt drawdowns, Authority capital contributions should be withheld until the Authority is satisfied that no draw-downs of Senior Debt or equity are retired behind those of the Authority and that the ratio of private capital to Authority capital is not adversely effected. Where there is an equity bridge facility (with debt being provided instead of equity on a temporary basis), Authorities should ensure that the full equity investment remains at risk on a termination (such that normal risk-allocation principles are maintained). Authorities should also ensure that levels of sub-contract security (bonds, liquidated damages, etc.) remain at the same levels regardless of any public-sector capital contribution (i.e. if there is a 10% Authority contribution, sub-contract security levels should still be gauged against 100% costs and not just against the 90% private sector contribution). No amendment of the core drafting listed in Section 1.4.1 should be made, except that an allowance may be made for future capital contributions as set out in the base case when calculating the amount of any termination payment under Section 21.2.9 where the "no retendering" termination route is used.