3.1.1  General principles

Set out below is a summary of the guiding principles in establishing a payment mechanism for all Availability PPP Projects.

The role of the payment mechanism is to put into financial effect the allocation of risk and responsibility in the Project Deed and provide the incentives for Project Co to deliver Services in a way that achieves value for money.

The basic principles underpinning any payment mechanism used for an Availability PPP Project in Victoria is that the periodic Service Payments made by the State: 

•  are for the delivery of Services, being the outputs specified in the Services Specification;

•  commence when the Project Assets are available for use and the Services can be performed (i.e. from the Date of Commercial Acceptance);

•  are 'unitary' Service Payments which consolidate the various components of asset and service delivery; and 

•  are made to the extent that the Services are provided and the Project Assets are available for use - the Service Payment will be Abated where the Project Assets are not available for use or the Services are not performed in accordance with the standards set out in the services specification in the PSDR. 

The components of a typical Service Payment are shown in Diagram 17 and discussed below.

Diagram 17