MAGA risks are not within the Private Partner's control but the Private Partner can be adversely affected by their occurrence. Because of the potential impact of MAGA events on the Private Partner's ability to perform its contractual obligations and be paid, the Private Partner and its Lenders will carefully assess the risk of such events occurring and will expect any significant MAGA risks to be identified and allocated to the Contracting Authority under the PPP Contract. See Section 2.2.1.
Transferring any MAGA risks to the Private Partner is likely to have two consequences because of the Private Partner's lack of control over the occurrence or management of such events: (i) at a minimum, to attract a high pricing premium (which could render the PPP Project unaffordable), or (ii) simply to make the Project unbankable.
The purpose of a MAGA clause is therefore to allocate certain agreed types of political risk to the Contracting Authority, address the consequences of such risks occurring and provide the Private Partner with appropriate relief and compensation.