5  Principles of Adjustment

5.1  The following guidelines shall be followed in revising the Base Case.

(a)  wherever possible the revision shall be carried out without altering the logic, formulae, inputs and assumptions incorporated in the Base Case in any way whatsoever and only data such as costs incurred by the Service Provider and the timing and amounts of drawdowns of funding shall be changed;

(b)  where it is necessary to amend the logic, formulae, inputs and assumptions incorporated in the Base Case to permit revisions to be made, this shall be carried out to the minimum extent necessary and in accordance with generally accepted accounting principles;

(c)  where any amendment is made to the logic, formulae, inputs and assumptions incorporated in the Base Case, then the Base Case, as amended shall first be run with the data included in the Base Case immediately prior to amendment to ensure that the outputs from the Base Case as amended correspond to the outputs immediately prior to amendment; and

(d)  the parties may only agree changes or additions to the guidelines set out in this paragraph 5.1 these assumptions where they are required in relation to circumstances not dealt with by the assumptions in the Base Case; and

(e)  unless otherwise agreed by the parties, the Service Provider shall not be permitted to backdate any increase in the Unitary Change as a result of an Authority Change.

5.2  Any amendment to the logic, formulae, inputs and assumptions incorporated in the Base Case shall be fully recorded so that the manner in which the revised Unitary Charge is calculated can be readily verified.  

5.3  Any reference in this Contract to no better and no worse and to leaving the Service Provider being in a no better and no worse position, shall be construed as to ensure that on comparing the output of the Base Case (as at the Effective Date) before and after entering into the required Base Case revisions, such comparison of the output from such Base Case shows that:

(a)  the Base Case Equity IRR shall be unchanged;

(b)  the Service Provider shall be in a position which is unchanged in relation to the minimum and average Debt Service Cover Ratio, and the minimum and average Loan Life Cover Ratio; and

(c)  the Service Provider is left in a position which is unchanged in relation to inflation hedging of the Unitary Charge as set out in [paragraph 1.5 of Part 1 of the Payment Mechanism].

5.4  If any material change in the risk profile of the Project arises from the revision, taking account of similar projects exposed to similar risks to those arising out of the circumstances giving rise to the revision, the parties may agree that the nominal post-Service Provider tax pre-Shareholder tax Equity IRR may be adjusted and such revision may only be an upwards adjustment.