In a Private Partner Default Termination, the debt-based option mentioned in Section 4.4.2(a) will not be applicable as there is no senior debt. The appropriate method of calculating any termination payment should be determined on a case by case basis and will depend entirely on the particular circumstances of the PPP Project and the nature and source of the corporate funding. Possible alternatives include:
(a) basing compensation on the market value of the PPP Contract if retendered, as highlighted in Section 4.4.2(b) and Section 10.3.1(b). As bidders may want to bid on a project financed basis, the PPP Contract drafting should allow for this. As stated above, the market value approach is uncommon generally and more difficult to implement in emerging markets and therefore careful consideration should be given to the justification for using this approach.
(b) using the related and more feasible alternative to (a) of estimated market value as described in Section 4.4.2(b). However, again such approach may be difficult in emerging markets, and the Contracting Authority may need to consider agreeing a "top up" or baseline amount.
(c) following a similar approach to Force Majeure (see Section 10.3.3) and calculating capital and operating expenditure up to the termination date (as shown in the Original Base Case), subtracting payments up to that date and adding some element of third party costs.
(d) basing compensation on the equity investment cost, e.g. if financed by intercompany loans by reference to the coupons on those loans.
In any event, Contracting Authorities should bear in mind the principles set out in Section 4.4.1, particularly in respect of unjust enrichment.