2.33 The Trust's liabilities in the event of contract termination will depend on the circumstances that result in contract termination and the outcome of a number of financial calculations specified in the contract. There are three main types of termination event dealt with in the contract:
■ Termination by default of THC Dartford;
■ Termination by default of, or voluntary termination by, the Trust; and
■ Termination without default due to major unforeseeable events (known as force majeure).
2.34 The Trust's termination liabilities due to default by THC Dartford (which is outside the Trust's control) would be computed according to the contractual provisions summarised in Figure 16.
2.35 As shown in Figure 16 the Trust took the opportunity during the refinancing negotiations to renegotiate aspects of its termination liabilities to limit the increase in termination liabilities following the refinancing. These liabilities could, however, still be as much as just over the whole of THC Dartford's enlarged outstanding debt following the refinancing. This means that following the refinancing, depending on the timing of a termination, the Trust's termination liabilities might increase above the cost of the hospital to include some or all of the additional £46 million debt THC Dartford took on to generate the refinancing gains. The Department notes, however, that for this to occur THC Dartford would have to default on a contract which gives them the prospect of further benefits and, in any event, the Trust would have the right to discharge its termination liabilities by continuing to pay the funders the reduced annual payments the Trust currently pays under the contract following the refinancing.
2.36 The original arrangements, which were part of this first PFI hospital contract let in 1997, were similar to arrangements in other PFI contracts at that time. But the terms are different in current contracts where termination liabilities are determined as the market value of the remaining project. The Trust and its advisers considered, during the refinancing negotiations, changing the contractor default termination clause to the market value basis. They decided not to pursue this as they had agreed with THC Dartford that minimal changes to the contract would be made and they placed particular value on the fact that the existing terms would provide the Trust with greater certainty, and a cap on the extent of its termination liabilities.