2.3.1  Requirement

The private party may be required to provide a Conditions Precedent bond to a specified value by the date of execution of the project agreement. Whether or not a Conditions Precedent bond is required, and the value of the bond, will depend on various factors such as:

(a)  whether a process bond was lodged during the bid phase;

(b)  other incentives to reach Financial Close, such as the structure of the contract term or payment mechanism;

(c)  the risk and consequences of the private party failing to meet the Conditions Precedent;

(d)  the risk and consequences of failure to reach Financial Close;

(e)  the value of the individual project;

(f)  the market environment; and

(g)  timing issues (e.g. whether there is likely to be a significant interval between execution of the project agreement and Financial Close).