Where the Project Deed has been terminated and Project Co has any Actual Debt outstanding, the State may elect to assume some or all of that Actual Debt (including taking novations of some or all of the hedging agreements under the Finance Documents). If the State so elects:
• Project Co must ensure that such rights and Liabilities are novated to the State; and
• the amount of the Termination Payment which the State would otherwise be obliged to pay will be reduced by:
- the amount of any Liability for Actual Debt assumed by the State; and
- the amount of any costs of terminating the Finance Documents which would otherwise have been taken into account in determining the Termination Payment, but which are not incurred by reason of the novation.
Actual Debt is defined as being the aggregate indebtedness of Group Members under the Finance Documents, excluding any indebtedness that is in the nature of, or identified in the Financial Model as being, Equity Funding. Accordingly, all of the Finance Documents must be capable of novation to the State, so that the State can exercise its rights under clause 46.7. This will include in some circumstances novation of Finance Documents which relate to assets rather than Liabilities (for example derivatives or swaps that are 'in the money' when the Project Deed has been terminated) as they will serve to reduce the face value of other indebtedness.