21.2.1 The appropriate size of capital contributions will depend, inter alia, on the risk characteristics of the project. The overriding principle should be that sponsor equity and private sector debt should absorb all of the expected losses in the project as determined through stress testing of cash flows and construction period delay and all default scenarios. All proposed capital contributions will be assessed by Infrastructure UK as part of the business case approval and the derogations processes. Any proposed changes to capital contributions from what was assumed in the original Outline Business Case need to be reapproved by Infrastructure UK.
21.2.2 Authorities should be mindful that capital contributions combined with other public sector support arrangements, such as public sector equity or guarantees could have the adverse effect of changing the overall balance of risk transfer. Consequently the quantum of the capital contributions should be considered alongside other public sector arrangements so as not to undermine this principle.