25.2.1  Payment amount

On termination of the project agreement for any reason other than private party default (e.g. native title claim76, a Force Majeure Event77, a Termination Event78 or Voluntary Termination79), government must, subject to section 25.2.3, pay to the private party:

(a)  an amount equal to:

(i)  the lower of senior debt owing to financiers at the Termination Date and the amount forecast in the Base Case Financial Model to be owing to financiers as at the Termination Date; and

(ii)  any break costs payable by the private party to the financiers or benefits receivable by the private party under the finance documents as a direct result of early termination, including hedging arrangements (not included in paragraph (i) above),

less the deductions listed in section 25.2.2 below; and

(b)  an amount which gives an Equity Return - being on both any share capital subscribed at Financial Close and any shareholder subordinated debt - (taking into account distributions already paid to shareholders) equal to:

(i)  the nominal after tax internal rate of return to the Termination Date equal to the Equity Return shown in the Base Case Financial Model, (if the Termination Date occurs within a pre-agreed period from the anniversary of the date from which the private sector is entitled to levy tolls or charges) (e.g. 3 or 5 years);or

 (ii)  a reasonable forecast of distributions likely to be made to equity investors based on the historical performance and current projected growth (if the Termination Date occurs after the relevant anniversary of the date from which the private sector is entitled to levy tolls).

The amount in paragraph (b) must take into account:

(iii)  amounts received or paid by the shareholders up to the Termination Date;

(iv)  amounts the private party must pay as a consequence of the termination (including demobilisation costs and third party costs but not including amounts between parties not engaged on arm's length commercial terms).

The Termination Payment is based on the assumption that the debt finance component of the project is bank debt.

To the extent that the project is fully or partly financed by a bond issue, appropriate amendments to the senior debt element of any payment will need to be made. In a project financed by bonds, government will only pay the par value of the bonds outstanding (together with any accrued and unpaid interest) less any deductions.

In regard to paragraph (a)(i) above, mezzanine and other subordinated debt will be afforded the same protection as senior debt for purposes of the Termination Payment, but only to the extent that such debt has the essential characteristics of senior debt (other than to the extent that it is subordinated to pure senior debt). This will be determined on a project specific basis depending on the debt structure of the private party. However, government will not compensate subordinated debt which is effectively equity.

In regard to paragraph (a)(ii) above, break costs referred to in this document will be subject to the private party's obligation to mitigate any such break costs. The break costs are also intended to capture any break costs incurred as a result of early termination of hedging arrangements.

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76  See section 5.1.1(e) in Chapter 5 (Native title and artefacts) and section 24.1.2 in Chapter 24 (Termination).

77  See section 24.1.3 (Force Majeure Event) in Chapter 24 (Termination).

78  See section 24.2 (Termination by private party) in Chapter 24 (Termination).

79  See section 24.1.4 (Voluntary Termination) in Chapter 24 (Termination).