Assessing allocation

There is the likelihood that in the event of a downturn and the need for alternate service suppliers, the government requires certain conditions to be met for any change in major contractor/ subcontractors and for any change in control of the Project Company.  These conditions restrict the potential suppliers of these services to the Project Company and it could be argued that the risk of the Project Company being unable to supply the requisite services is increased by these restrictions.

It could be argued that in a worst case scenario, if the Project Company cannot provide the requisite services then the government either has to step-in or terminate the contract and therefore this is a government risk. This may be true in the extreme case but it assumes that there is no risk transfer being effected through the Contract Documents.  The contract that the Project Company signs with the government obliges it to perform and carry out its obligations to provide services over the Project Term, therefore, the Project Company has to find alternate suppliers for the service in the event of this risk occurring.

In summary, this risk is primarily a Project Company risk, but it is acknowledged that there is an element of sharing.  The proposed allocation of the risk is 90 per cent Project Company risk and 10 per cent State risk.