3.3.1 What is the Project Rate and what is it used for?

The Project Rate is required to identify the expected return required by the market for undertaking the project and to enable the estimation of the Systematic Risk Premium (i.e. difference between the Project Rate and the Risk Free Rate) which will be apportioned between the parties to determine the appropriate Discount Rate to evaluate competing Private Sector bids. As noted earlier, this premium reflects Systematic Risk only and is important in the application of the modified form of the CAPM.