For the purposes of valuing the Project under either the competitive retender process, or by an independent expert appointed to calculate the Fair Market Value of the Project, the following assumptions apply:
• an incoming purchaser assumes the same rights and obligations as Project Co had under the original Project Documents;
• defaults that may have been subsisting prior to termination will be disregarded; and
• any costs that the incoming purchaser may incur in assuming the role of Project Co will be allowed.
The Default Termination Payment calculation then:
• adds any amounts owing by the State to Project Co under the Project Documents; and
• deducts Liabilities of Project Co to the State together with amounts payable to Project Co by third parties.
In calculating the Fair Market Value under an independent expert determination, the forecast cashflows should be discounted at a discount rate which reflects the risk of the underlying cashflow, i.e. the real pre-tax project IRR reflected in the Financial Model. However, since underlying rates in the market such as the real yields on Commonwealth bonds vary over time, the discount rate calculation acknowledges the effect of changes to the underlying risk-free rate. If a liquid market existed and the Project was retendered, a hypothetical bidder would take into account current market yields on risk-free investments in choosing what discount rate to apply to the Project.