4.12 As reviewed earlier in para 2.32 the rates of return to the equity investors carry a premium of some 15 per cent above the risk free rate. The equity investors have a substantial exposure to project risk (with the exception of traffic volume risk). Underperformance leads to lower payments, followed by a notice requiring corrective action. Ultimately LUL could step in to correct defects at the Infraco's expense. This is potentially mitigated by appeal to the Arbiter in extreme circumstances; (where the Infraco has exhausted all of its contingencies plus a further amount of the relevant materiality threshold (£50 million for Metronet and, initially £200 million for Tube Lines) if the additional costs that have been incurred can be shown to be economic and efficient.
4.13 Claw back provisions that become effective if the equity rate of return exceeds a reasonable upper bound were not required. Instead the Arbiter recalibrates pricing for an economic and efficient Infraco to earn agreed rates of return every 7½ years. The contract (Schedule 1.9) specifies these agreed rates for the Arbiter (JNP 26 per cent, BCV 18.3 per cent and SSL 18.2 per cent). This protective arrangement may be weakened if the amount of investment that bears equity risk is reduced by any refinancing (although the public sector shares any gains) that permits any original investors to recover their investment early and therefore earn a higher rate of return.