12.4 Securing finance

A payment mechanism should not ring-fence or guarantee the private party's finance charges. The relatively weak risk allocation created by such a structure would not usually give good value for money and government would be taking the risk of the interfaces between, say, the availability and the service delivery elements.

Experience has shown that payment mechanisms based on availability benefits or usage, or a combination of them, are capable of being financed, provided the payment mechanism fits the project, the risk allocation reflects a commercial position, reasonable cure periods are included and abatements are appropriately weighted. Financiers typically expect reductions for availability payments, performance abatements, or (with usage being an element of the payment) likely downturn in usage, all to be accommodated within their financial models. Their aim is to achieve minimal risk of losing the whole payment.