Simple and objective calculation methods will provide greater certainty for all Parties, minimising the risk of disputes and enabling less risk premium to be costed into the Private Partner's price. Equity and debt elements to be compensated must be clearly defined and understood by all Parties, including any financing breakage costs (e.g. under interest rate hedging arrangements), any "make-whole" payments (e.g. in respect of fixed rate loans37 or bonds) and any default interest. As mentioned above, the inclusion of an express termination payment provision will not necessarily result in any greater liability on the Contracting Authority than would be the case at general law, but the certainty provided is key to bankability.
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37 Fixed rate debt provided by institutional and non-institutional lenders has become increasingly common over the past five years in developed PPP markets such as the Netherlands.